Canadian Western Bank Annual Report 2010

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FY2010 Annual Report · Canadian Western Bank

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OUR HISTORY OF FINANCIAL PERFORMANCE

$ 15,000

12,000

9,000

6,000

3,000

$ 500

400

300

200

100

1.00%

0.75

0.50

0.25

0.00

$ 12,000

10,000

8,000

6,000

4,000

2,000

$ 200

150

100

100%

FIVE YEAR FINANCIAL SUMMARY

($ thousands, except per share amounts)

Results of Operations
Net interest income (teb)(1)
Less teb adjustment
Net interest income per financial statements
Other income
Total revenues (teb)
Total revenues
Net income
Return on common shareholders’ equity(2)
Return on average total assets(3)
Per Common Share(4)
Average common shares outstanding (thousands)
Earnings per share

Basic
Diluted
Diluted cash(5)

Dividends
Book value
Market price

High
Low
Close

Balance Sheet and Off-Balance Sheet Summary
Assets
Cash resources, securities and resale agreements
Loans
Deposits
Subordinated debentures
Shareholders’ equity
Assets under administration
Assets under management

Capital Adequacy
Tangible common equity to risk-weighted assets(6)
Tier 1 ratio(7)
Total ratio(7)

Other Information
Efficiency ratio (teb)(8)
Efficiency ratio
Net interest margin (teb)(9)
Net interest margin
Provision for credit losses

as a percentage of average loans

Net impaired loans as a percentage of total loans
Number of full-time equivalent staff(10)
Number of bank branches

2010

2009

2008

2007

2006

328,664
11,186
317,478
105,595
434,259
423,073
163,621

236,354
7,847
228,507
91,612
327,966
320,119
106,285

228,617
5,671
222,946
70,240
298,857
293,186
102,019

210,659
5,410
205,249
62,821
273,480
268,070
96,282

168,684
4,078
164,606
53,086
221,770
217,682
72,007

17.1%
1.24

13.2%
0.86

15.9%
1.03

17.4%
1.18

14.8%
1.12

65,757

63,613

63,214

62,354

61,514

2.26
2.05
2.09
0.44
14.08

26.59
19.85
25.36

1.51
1.47
1.49
0.44
12.16

23.00
7.52
21.38

1.61
1.58
1.59
0.42
10.70

32.20
14.67
18.44

1.54
1.50

1.50
0.34
9.48

30.86
20.78
30.77

1.17
1.13

1.14
0.25
8.39

22.78
16.64
21.15

$ 12,701,691
1,876,085
10,496,464
10,812,767
315,000
1,148,043
8,530,716
795,467

$ 11,635,872
2,188,512
9,236,193
9,617,238
375,000
986,499
5,467,447
878,095

$ 10,600,732
1,798,137
8,624,069
9,245,719
375,000
679,148
4,347,723

$ 9,525,040
1,961,241
7,405,580
8,256,918
390,000
595,493
4,283,900

$ 7,268,360
1,332,987
5,781,837
6,297,007
198,126
519,530
3,344,414

—

8.5%
11.3
14.3

44.1%
45.3
2.74
2.64

0.21
0.62
1,716
39

8.0%
11.3
15.4

48.2%
49.4
2.10
2.03

0.15
0.68
1,339
37

7.7%
8.9
13.5

45.2%
46.1
2.30
2.25

0.15
0.19
1,284
36

7.7%
9.1
13.7

44.6%
45.5
2.58
2.51

0.16
(0.57)
1,185
35

8.6%

10.1
13.7

46.0%
46.9
2.62
2.56

0.20
(0.75)
1,097
33

(1) Most banks analyze revenue on a taxable equivalent basis (teb) to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statements of income)

includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividend received is significantly lower than would apply to a loan or security of the same amount. The adjustment
to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does
not have a standardized meaning prescribed by generally accepted accounting principles (GAAP) and, therefore, may not be comparable to similar measures presented by other banks.

(2) Return on common shareholders’ equity is calculated as net income after preferred share dividends divided by average common shareholders’ equity.

(3) Return on assets is calculated as net income after preferred share dividends divided by average total assets.

(4) A stock dividend effecting a two-for-one split of the Bank’s common shares was paid in 2007. All prior period common share and per common share information has been restated to reflect this effective split.

(5) Diluted cash earnings per share is diluted earnings per common share excluding the after-tax amortization of acquisition-related intangible assets.

(6) Tangible common equity to risk-weighted assets is calculated as shareholders’ equity less subsidiary goodwill divided by risk-weighted assets, calculated in accordance with guidelines issued by the Office of the Superin-
tendent of Financial Institutions Canada (OSFI). As of November 1, 2007, OSFI adopted a new capital management framework called Basel II and capital is managed and reported in accordance with those requirements.
Capital ratios prior to fiscal 2008 have been calculated using the previous framework.

(7) Tier 1 and total capital adequacy ratios are calculated in accordance with guidelines issued by OSFI. As of November 1, 2007, OSFI adopted a new capital management framework called Basel II and capital is managed and

reported in accordance with those requirements. Capital ratios prior to fiscal 2008 have been calculated using the previous framework.

(8) Efficiency ratio is calculated as non-interest expenses divided by total revenues.

(9) Net interest margin is calculated as net interest income divided by average total assets.

(10) The significant increase in the number of full-time equivalent staff in 2010 compared to the prior year reflects the Bank’s acquisition of National Leasing Group Inc., effective February 1, 2010.

FIVE YEAR FINANCIAL SUMMARY

PERFORMANCE TARGETS & OUTLOOK

2010 Highlights

» Record net income of $163.6 million,

an increase of 54% over the 2009 record.

» Record diluted earnings per common share of $2.05,

up 39% over 2009.

» Record total revenues (teb) of $434.3 million,

up 32% compared to the record established in 2009.

» Net interest margin (teb) of 2.74%, up 64 basis points.

» Return on common shareholders’ equity of 17.1%,

up 390 basis points.

» Return on assets of 1.24%, up 38 basis points.

Loan growth of 14% marked the achievement of
double-digit loan growth in 20 of the past 21 years.

» New benchmark efficiency ratio (teb) of 44.1%,

a 410 basis point improvement.

» Marked 90 consecutive quarters of profitability.

» Completed the acquisition of National Leasing,

effective February 1, 2010.

» Achieved record net income in the insurance segment.

» Opened new full-service commercial and retail

banking centres in Sherwood Park, Alberta and Surrey,
British Columbia.

» Surpassed $6 billion of assets under administration in

Canadian Western Trust.

We are pleased to report Canadian Western Bank Group
surpassed all but one of its 2010 minimum performance targets.
Record financial performance led to new annual benchmarks
for earnings, revenues and efficiency despite challenges related
to the post-recessionary operating environment. Results reflect
a robust improvement in net interest margin early in the year
and generally strong performance across each business line.
The second quarter acquisition of National Leasing was a key
highlight and materially benefited all performance metrics
except the provision for credit losses. The impact of National
Leasing’s historically higher loan loss experience compared
to the Bank’s core lending business is more than offset by the
relatively high yield earned on the lease portfolio.

Our outlook for 2011 includes expectations for continued
strong performance despite certain hurdles related to economic
and competitive factors. We have set challenging targets that
confirm ongoing confidence about the benefits of our proven
business plan, as well as our geographic position in Western
Canada. We will continue to invest in our people, premises
and technology to further diversify and expand our operations
while supporting sustained growth. We will remain focused
on high quality assets and expect to achieve another year
of double-digit loan growth. We plan to maintain strong
profitability and efficiency and have also targeted double-
digit growth in total revenues, on a taxable equivalent basis
(teb – see definition following the financial highlights page).

2010
Minimum Targets

2010

2011

Performance Minimum Targets

Net income growth (1)

Net income growth, before taxes (teb) (2)

Total revenue (teb) growth

Loan growth

12%

n/a

12%

10%

Provision for credit losses as a percentage of average loans

0.15 to 0.20%

Efficiency ratio (teb)

Return on common shareholders’ equity (3)

Return on assets (4)

48%

13%

0.90%

54%

42%

32%

14%

0.21%

44.1%

17.1%

1.24%

10%

12%

10%

0.20 to 0.25%

46%

15%

1.20%

(1) Net income before preferred share dividends.
(2) Net income before income taxes (teb), non-controlling interest in subsidiary and preferred share dividends.
(3) Return on common equity calculated as annualized net income after preferred share dividends divided by average common shareholders’ equity.
(4) Return on assets calculated as annualized net income after preferred share dividends divided by average total assets.

KNOWING WHAT WORKS

TAble Of CONTeNTS

This sounds simple enough, but our ability to successfully manage and grow

through challenges confirms this as a core value that continues to set us apart.

Our goal is not to reinvent how business is done but, rather, to continue to do

what we’ve always done, only better.

We know what works for our customers: our teams of business professionals

are committed to working hard for our clients and recognize that customer

needs always come first. We know what works for our employees: our culture

thrives on respect, dedication and an entrepreneurial spirit that connects

and motivates us. We know what works for communities: we embrace our

responsibility to strengthen and support the places where our customers and

employees live, work and play. We know what works in our target markets:

headquartered in Western Canada with a select business focus across the

country, we offer a local perspective and understand what drives our economies

and industries. We know what works for our shareholders: consistent growth,

a clear vision for the future and proven financial performance demonstrated

by 90 consecutive profitable quarters.

Our commitment to knowing what works has been a key reason for Canadian Western
Bank Group’s (CWB Group) success for over 26 years. Now it is time to build on the
fundamentals that brought us here so we can continue to grow in the future. While
our roots are in Western Canada, we understand the financial services marketplace in
all the places where we do business. We demonstrate this understanding through our
products, services and overall approach to serving customers.

We have always taken the conservative road in the way we manage our businesses.
We make decisions based on common sense and focus our strategies on areas that we
know and understand. We support our communities and drive economic growth by
meeting our customers’ needs and investing in the development and well-being of
our employees. While we are proud of our track record, we also know there are many
areas we can improve, more places to grow and people to reach.

We invite you to know more about what works for CWB Group in the pages that follow.

Knowing What Works

Canadian Western Bank Group

Q&A with the President and CEO

Q&A with the Chairman

Canadian Western Bank

Canadian Western Financial

Canadian Direct Financial

National Leasing

Canadian Western Trust

Optimum Mortgage

Valiant Trust

Canadian Direct Insurance

Adroit Investment Management

Corporate Social Responsibility

Corporate Governance

28 Management’s Discussion and Analysis

Financial Statements

111 Board of Directors

111

Senior Officers

112

Shareholder Information

112 Award of Excellence Recipients

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 1

CANAdIAN
WeSTeRN
bANK GROup

www.cwbankgroup.com

CWB Group is made up of Canadian Western Bank (CWB or the Bank)
and eight operating companies/divisions that collectively offer services
in the areas of banking, trust, insurance and wealth management.
We primarily serve customers through 39 banking branches, a centralized
equipment leasing office, eight trust locations, two insurance call centres
and one wealth management location.

CWB’s subsidiary companies include National Leasing Group Inc., Canadian Western
Trust Company, Valiant Trust Company, Canadian Direct Insurance Inc., Adroit
Investment Management Ltd., and Canadian Western Financial Ltd. Canadian
Direct Financial is a division of the Bank while Optimum Mortgage is a division of
Canadian Western Trust. As Western Canada’s largest publicly traded Canadian bank,
we have combined balance sheet assets of over $12 billion, including more than $10
billion of total loans. Our assets under administration are over $8 billion, and assets
under management are approaching $1 billion. Together, CWB Group now employs
over 1,800 people in more than 50 communities across Canada.

CWb Group employees

BuILDING ON ThE FuNDAMENTALS

Each figure represents
100 employees of CWB Group.

Our founders knew what would work when CWB was formed in 1984, and many of
these same principles still drive our success today. We are proud to be headquartered
in Western Canada and are uniquely positioned to understand and capitalize on the
many opportunities in our markets. This is where we live and where we see the best
opportunities to drive the evolution and future growth of CWB Group. However,
we will also continue to expand our reach within select business areas in other parts
of Canada. Our proven strategies, conservative management, strong financial footing
and solid capital base have us positioned to expand our services and support new
growth while remaining ready to manage any challenges that may arise. Everyone
knows the best things in life take time, and we are committed to doing what’s best for
our customers, employees, communities and shareholders over the long term.

The way we do business is rooted in our culture, where every person makes a
difference and is appreciated for their commitment and contribution. Our willingness
to communicate, listen and work hard helps us build strong business relationships.

ALBERTA (AB) - 840

BRITISh COLuMBIA (BC) - 648

MANITOBA - 250

SASKATChEWAN - 58

“I am very proud of the organization we have become. Our fundamental strengths
‘came shining through’ in 2010 and are reflected in our record financial results,
a continued focus on developing our people and our award-winning corporate culture.”

ONTARIO (and other) - 32

–Tracey Ball, Executive Vice President and Chief Financial Officer, Canadian Western Bank

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

Canadian Western Bank, along with its
subsidiaries and operating divisions,
comprise Canadian Western Bank Group

Subsidiary Company

Operating Division

† Includes both full- and part-time employees

Canadian Direct
Insurance

Employees†: 294
Number of Policies
Outstanding: 185,000+
Annual Gross Written
Premiums: $124 million+

Valiant Trust

Employees†: 42
Appointments
in 2010 (#): 496
Number of Clients: 275+

Canadian Western
Bank Group

Employees†: 1,800+
Clients: 600,000+
Total Assets: $12.7 billion+
President & CEO:
Larry M. Pollock
Chairman: Allan W. Jackson

Canadian
Western Bank

Employees†: 1,093
Consecutive Profitable
Quarters: 90
Total Branches (#): 39

Canadian
Western Trust

Optimum
Mortgage

Employees†: 70
Investment Accounts (#):
46,000+
Total Assets Under
Administration:
$6 billion+

Employees†: 45
Total Mortgages:
~$800 million
Client Mortgages (#):
3,000+

Canadian
Direct Financial

Established: 2008
Deposits: $90 million+
Provinces in Canada
Where Products Are
Offered (#): 9

Adroit Investment
Management

Employees†: 11
Total Assets Under
Management:
~$800 million
Number of Client
Relationships: 300+

Canadian
Western Financial

Mutual Fund
Representatives (#):
100+
Client Mutual Funds:
$115 million+

National Leasing

Employees†: 267
Total Leases Under
Management:
$680 million+
Leases Outstanding (#):
58,000+

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 3

AN INTeRVIeW WITH
lARRY M. pOllOCK,
pReSIdeNT & CeO

Q: CWb Group had a great year in 2010 – what stands out for you the most in terms

of performance?

A: We posted record financial performance and closed out the year with our
90th consecutive profitable quarter. I believe we are probably the only bank in
North America that can claim such a long history of consecutive profits, and that’s
something we’re very proud of. Our overall performance turned out to be much
better than we anticipated at the beginning of the year. The largest contributor
to our exceptional revenue and profit growth was the significant recovery of our
net interest margin in the wake of the global financial crisis experienced in 2008
and 2009. CWB has a relatively simple business model, so the spread we earn
on our loans has a big impact on our overall results. When we set our minimum
performance targets for 2010, we expected it would take longer for our margins
to bounce back, so it was positive to see it happen in the first quarter. In step with
our great performance in the Bank, Canadian Western Trust and Canadian Direct
Insurance had record results as well. The contribution from our acquisition of
National Leasing this year also surpassed expectations. I guess you could say our
operations were running on all cylinders in 2010.

Q: CWb Group has a long track record of consistently delivering strong loan growth
and stellar credit performance. How do you feel about the organization’s ability
to continue this trend in the future?

A: We have posted double-digit loan growth in 20 of the past 21 years, with
the only exception coming in 2009 when loans grew by 7%. Our ability to grow
through challenging economic and market conditions when many other banks
were shrinking speaks volumes about the strength of our franchise. We will
continue to build customer awareness and increase market share by working hard
for our clients and leveraging the benefits of our service advantage, particularly
when it comes to meeting the needs of western Canadian businesses. We are
targeting another year of double-digit loan growth in 2011 and I am optimistic
about our ability to achieve this. We still have ample room to expand in all of the
areas where we lend.

The greatest impact on loan growth during the economic downturn was felt in our
large-ticket equipment financing and real estate construction portfolios. There just
wasn’t a lot of new business, and these portfolios tend to pay down very quickly
compared to our other types of loans. As economic circumstances have improved,
we are seeing more optimism related to new growth opportunities and credit
performance across all of our lending areas. The benefits of our focus on high
quality loans and secured lending practices continue to pay off. One of the ways we
add value for shareholders is by growing faster than the industry without sacrificing
credit quality, and we have proven our ability to deliver on this, particularly in the
challenging economic environment of the past few years.

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

Q: What prompted the acquisition of National leasing, and what does it mean

for CWb Group going forward?

A: When we consider acquiring any company, we make sure we know exactly
what we’re getting into beforehand. I started in the equipment leasing business
over 35 years ago, and it’s really just an extension of the type of lending we do
in the Bank. We also looked at National Leasing’s very strong culture, which was
clearly a great fit with CWB Group. The company is based in Winnipeg, so it’s also
consistent with our strategic focus in Western Canada. We are extremely excited to
have successfully closed this deal.

National Leasing was a private company and two of its key challenges before
joining CWB Group were securing competitive funding and accessing additional
capital to grow the business. With the Bank’s strong balance sheet and ability to
provide lower cost funding, their doors are now open to capitalize on growth
opportunities that previously would have been very challenging. National Leasing
is a dominant player in offering small and mid-sized leases in Canada, and there
is still plenty of room to grow and expand. The leadership team and employees
at National Leasing are thrilled about their future with CWB Group and, frankly,
so are we.

Q: Are there opportunities for CWb Group to expand further via acquisition?
And, if so, in what areas are these opportunities most likely to arise?

A: We’re always looking at acquisitions, but finding an opportunity that
complements our existing business and culture is very challenging. I sometimes
say we should expect to kiss a lot of frogs before we find a prince, and that’s exactly
what we continue to do. We see potential for a number of smaller acquisitions in
small-ticket leasing, as we believe there is room for consolidation in this space,
particularly with privately owned leasing companies. We’re also looking to acquire
portfolios that may become available in other lending areas. We have an objective
to enhance our wealth management services, and certain acquisitions, on top of
organic growth, may be the most effective way to achieve our goals in this area.
Our strong balance sheet and solid capital base put us in an excellent position to
move on any opportunities that fit our objectives to grow, diversify and add value
for CWB shareholders.

“Our strong balance sheet and solid
capital base put us in an excellent
position to move on any opportunities
that fit our objectives to grow, diversify
and add value for CWb shareholders.”

Larry M. Pollock
President and CEO
Canadian Western Bank

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 5

Q: Can you give some perspective on your economic outlook and current
competitive factors that may be impacting CWb Group’s businesses?

A:
I think Western Canada is poised for modest economic growth in 2011.
Most indicators in our markets have improved considerably compared to a year
ago, but there are still uncertainties about the global economic recovery. Real
estate markets in Canada continue to show resilience despite a recent drop-off in
residential sales activity. Employment levels are also moving in the right direction.
While our current view is somewhat cautious, we are very confident about Western
Canada’s growth prospects over the long term, particularly once we see increased
global demand for commodities.

The competition in our market has increased, but we’ve continued to maintain our
margins and grow our market share. We learned a long time ago that we won’t
be successful by trying to be all things to all people so, instead, we offer superior
service, specific business and industry expertise, and competitive prices. We pass
on deals that don’t make sense and focus additional resources where we have a
distinct competitive advantage – areas like heavy equipment financing, real estate
construction lending, small-ticket leasing and alternative mortgages. We also see good
opportunities to grow oil and gas production loans as a percentage of our portfolio.

International banking regulations are in the midst of some major changes with
the introduction of basel III. How is CWb Group positioned to deal with these new
international rules that require banks to hold more capital?

A: CWB Group is very well capitalized and we are in an excellent position to
adapt to changing regulations. We have always taken a conservative approach to
managing our business, which includes maintaining a strong capital base. Our
operations are relatively straightforward and the new rules won’t impact us as much
as larger banks that have much more complex structures.

Q: You have been president and CeO for over 20 years. How does CWb Group
approach succession planning and what are your own personal plans for
the future?

A: Effective succession planning requires having a deep pool of candidates to
choose from. We put a great deal of time and effort into developing people who we
know are a good fit with our unique culture, brand and vision. We take succession
planning very seriously and our senior management team, along with the Board
of Directors, have succession plans for every key position in our organization,
including my own.

That being said, I plan to be around for awhile yet. I am still very engaged and one
of the things that really energizes me is when people doubt our ability to deliver on
our goals. If there is one thing that keeps me up at night, it’s that our current share
price doesn’t reflect the true value we’ve built. As a team, we will continue to prove
the doubters wrong.

Photo Credit:
Roth and Ramberg

In December 2009, Larry M. Pollock
was selected as Alberta's 2009 Business
Person of the Year. This award was the
cover story for the December 2009
issue of Alberta Venture magazine.

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

Q: What were you most proud of during the year?

A: Without question, it’s the ongoing commitment and dedication of our
employees. We now have a team of more than 1,800 people, and it’s amazing to
see them all working toward the same goal of providing sound financial solutions
to meet the needs of our customers. I often wish that our clients and shareholders
could look inside our walls and see the passion our people have for this
organization. I am also very proud of our active involvement in the communities
where we operate, as well as the contributions we make in supporting economic
growth in our markets. It's very gratifying to play a part in helping people achieve
their goals.

In general, what are your strategies and expectations
for CWb Group in 2011 and beyond?

A: Consistent with our “knowing what works” philosophy, we plan to build on the
fundamentals that got us here. Essentially, do what we’ve always done, only better.
Within the Bank, we still have plenty of room for organic growth and expect our
concentration in Western Canada will continue to pay off for our clients and
shareholders. We opened two new full-service banking centres this year and will
continue to develop infrastructure and expand our market presence. We expect
to grow across all of our lending areas. We will also further develop our deposit-
gathering capabilities. It is important that we maintain our strong operating
efficiency while also investing in our future so we are positioned to deliver sustained
growth over the long term. We also have growth and development potential within
each of our subsidiaries. I am very excited about what the future holds.

We have set challenging performance targets for fiscal 2011, but we believe they
are attainable. At the beginning of fiscal 2009, we committed to surpassing $200
million of net income within five years, essentially doubling our profits. Based on
where we are today, I’m pleased to say that we may have to consider increasing this
performance goal. Stay tuned.

“…one of the things that really energizes
me is when people doubt our ability to
deliver on our goals. If there is one thing
that keeps me up at night, it’s that our
current share price doesn’t reflect the
true value we’ve built.”

Larry M. Pollock
President and CEO
Canadian Western Bank

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 7

AN INTeRVIeW WITH
AllAN JACKSON,
CHAIRMAN Of THe bOARd

Q: You’ve been on CWb’s board of directors (the board) since the bank was established
in 1984, but this was your first year as Chairman. What has been the board’s
main focus since you took the helm and has it changed compared to prior years?

A: The Board was very well run under the stewardship of the former Chair,
Jack Donald. He is a fine leader and was always surrounded by a very strong Board.
When I was asked to take over as Chair, I did not see the need to make a lot of changes.

However, we have somewhat refocused our activities with respect to corporate
governance. We try to spend more time on the aspects of governance that are centred
on working with management to develop a clear strategy with a proper balance of
risk and reward. Additionally, we ensure that our management team has the tools in
place to successfully execute our strategy and monitor performance. These are the
functions of a good board that I believe are most important. Often, I think corporate
governance is too narrowly interpreted to mean that adequate control frameworks
are in place, regulations are being followed, compensation programs are effective and
reasonable, and that the shareholders receive complete and accurate reporting. While
these are very important responsibilities of all boards, I think too much emphasis
creates the risk of not giving enough attention to strategy.

Q: What changes has the board made recently in terms of corporate governance?

A: Our Board continuously monitors governance best practices, and we introduced
significant changes in each of the past two years.

At our 2010 annual meeting, we implemented the right for shareholders to vote
for individual Directors, as opposed to a slate. There was a tremendous amount of
dialogue at the Board level over a period of years that preceded the implementation
of this change. The Board’s concern was that shareholders do not have the benefit
of seeing our Directors in action. Although our disclosure provides information on
such measures as attendance at Board meetings and the number of other boards
they are on, the attributes that make Directors most effective, such as the ability to
listen, ask critical questions and exercise independent judgement, are difficult to set
out in disclosure documents. Moreover, great Directors contribute to a company’s
well-being year-round, not just at Board meetings. Our shareholders can be assured
that if a Board Director was not contributing value or was not performing up to
expectations, that name would not be considered for re-election. However, we
were, and will continue to be, influenced by the wishes of our shareholders and
concluded their requests were not contrary to the best interests of the Bank.

This year, we plan to adopt the practice of most other financial institutions in
Canada and give our shareholders the right to vote on our approach to executive
compensation, often called “say on pay”. Say on pay is a non-binding, advisory vote

Allan W. Jackson
Chairman of the Board

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

that provides us with additional insight about the collective
view of CWB shareholders regarding our approach to executive
compensation. We will always welcome shareholders’ advice
and opinions on any subject. We wondered, however, whether
shareholders, as a group, can ever have enough information
about the unique needs of the Bank and its executives to
fully appreciate the issues. We spend a great deal of time and
energy to ensure CWB Group has an appropriate executive

compensation plan. This includes extensive work with our
executives and with compensation consultants to ensure
the needs of our stakeholders are met in an equitable and
productive manner. We have a top-tier management team, and
we need to make sure we retain and motivate them by providing
appropriate incentives that are aligned with the best interests of
CWB shareholders.

Q: CWb Group has a board with many long serving members. However, there have been a few changes over the past couple years.

What type of things does the board look for when recruiting new talent?

A: As a Board, the first thing we do is determine our needs, the
skills we require and the type of personalities that will be a fit
so we can continue to work together effectively. The expression
of personal opinions and constructive debates are a necessary
part of the process for good oversight and management, but
a board’s effectiveness can break down if there is too much

controversy because of conflicting personalities. Our goal
is to form a group of people with relevant backgrounds and
good skill sets that balance each other. It’s important for us to
recruit experienced individuals who are committed to working
collectively for the betterment of CWB Group.

Q: Was there any specific milestone achieved by CWb Group over the past year that really stands out for you?

A: Actually, there were several, but the biggest was probably
the day that National Leasing joined the CWB Group. You
often hear the word synergy being bandied about during a
merger or acquisition. While it sounds great, some people use
it as another way of saying, “wait until we get a hold of these
guys and show them how to run the business.” Just occasionally,

it means the two companies are closely matched in culture and
values, and that only great things can come. I think National
Leasing and CWB are two such companies. Our businesses are
similar enough that we understand each other, yet different
enough that we complement each other.

larry pollock has been the president and CeO for more than 20 years; is the board currently working on any succession plans
for CWb Group’s next leader?

A: Succession is one of the Board’s top priorities, and we have
plans in place for every key position. Earlier this year, Larry
signed a new contract through 2013. While the transition to
a new leader will definitely incorporate change, our current
executives operate as a cohesive team and the majority of our
existing leadership will still be here. Replacing great leaders

is never easy and we have an eye to the future. We know we
are not going to find another Larry Pollock, but we will find
another strong leader who shares the organization’s culture and
values, and brings his or her own strengths to the role. Even
though it’s still a ways out, we are well into the process of
identifying Larry’s successor.

Q: What do you believe are the main reasons for the success of CWb Group?

A: We have highly dedicated employees who are working
together under effective leadership. The founders of CWB,
Dr. Charles Allard and Mr. Eugene Pechet, had a dream to
establish a western-based bank that specialized in serving the
needs of western Canadians. They genuinely believed this was a
great opportunity, and they were right. Larry and his team have
cultivated a group of talented and motivated individuals who
are guided by a philosophy that I call aggressive conservatism.
The ability to consistently grow while carefully managing risks
is extremely important, especially for a financial institution.

The Bank started 26 years ago with $31 million of capital from
an initial public offering. Today, CWB Group serves more than
600,000 customers, has over $12 billion of assets, and its market
capitalization has surpassed $1.7 billion. I think Dr. Allard
and Mr. Pechet would be pleased to see how their dream has
progressed. Even more exciting is that we’re still a long way
from reaching CWB Group’s full potential. As an organization,
if we remember it’s our employees and our customers that make
us successful, our future will remain very bright.

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 9

CANAdIAN
WeSTeRN
bANK

www.cwbank.com

loan portfolio by lending Sector
(as of October 31, 2010)

General
commercial

21%

Oil & gas
production

Corporate
loans

Equipment
financing

15%

23%

Commercial
mortgages

15%

Real estate
project loans

17%

Personal loans
& mortgages

“Our approach to business works.
We build value for shareholders by
lending to industries that we know
and understand, and we focus on
building lasting relationships with
our customers.”

Chris Fowler
Executive Vice President
Canadian Western Bank

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CWB is the seventh largest Schedule I bank in Canada measured by
market capitalization, and is the largest Canadian bank regionally
focused on Western Canada. With assets of over $12 billion, the
majority of the Bank’s revenues are earned through spread lending,
which involves generating customer deposits and offering sensible
loans to businesses and individuals.

CWB builds solid relationships with our customers by offering great service and
reliable knowledge while focusing on the key points that set us apart from our
competitors. We specialize in business loans and are uniquely positioned to meet
the needs of small to medium-sized businesses in Western Canada. In addition to
general commercial financing, we have specific expertise in the areas of commercial
real estate and construction financing, energy lending, and large-scale equipment
financing and leasing. We offer comprehensive business banking services as well as
a complete range of personal banking products and services. Our goal is to meet the
needs of business owners and their employees, as well as individuals who want to
experience a western-based banking alternative for their saving and borrowing needs.

One of our strategies to mitigate the effects of a slow economic recovery and increased
competition is to strengthen our sales culture and increase customer recognition of
the CWB brand. We implemented a new marketing plan in support of this strategy,
positioning CWB as The Working Bank™. This advertising and communications
initiative reinforces our mission to be known and respected as Canada’s business bank,
providing Western Canada and other markets with a preferred source of financial
services. It speaks to the fact we have money to lend and reflects our commitment to
be efficient, down- to-earth and responsive in everything we do.

Growing and diversifying the Bank’s revenues is key in our objective to deliver
sustained growth and value for CWB shareholders. We also take pride in our long-
standing reputation for maintaining strong operating efficiency. For CWB Group,
our ratio of expenses to revenues was 44.1% in 2010, compared to 48.2% last year.
This means that we paid approximately 44 cents in operating costs for every dollar of
revenue earned, the lowest among all of the six largest Canadian banks. While effective
cost management is a part of our competitive advantage, we are equally committed to
reinvesting in our businesses.

Ongoing investments in technology and information services have been critical to
improving efficiencies and building on our competitive position. One example of
how we are using technology to improve our business is our new loan origination
program called WAVE™. One of the many future benefits we expect from WAVE™
is a streamlined application process for our lenders that will allow them more one-
on-one time with customers. WAVE™ will increase automation and enhance our
portfolio data and statistics. It will help us provide faster decisions for clients and
improve our ability to manage the Bank's capital.

CWB Branch Locations

Grande Prairie

St. Albert
Edmonton(5)

Prince
George

Vancouver(4)

Kamloops

Sherwood Park

Leduc

Red Deer

Calgary(5)

Coquitlam
Langley

Kelowna(2)

Lethbridge

Abbotsford

Cranbrook

Medicine
Hat

Courtenay

Nanaimo

Surrey(2)

Victoria

Existing branch

“CWB is a growing financial institution
that has tremendous appreciation for
its western roots. Our commitment to
service is part of CWB’s culture, and
we endeavour to be responsive and
efficient in everything we do.”

Randy Garvey
Executive Vice President
Canadian Western Bank

Saskatoon(2)

Yorkton

Regina

Winnipeg

New full-service branches in Surrey, BC & Sherwood Park, AB (opened in Q4, 2010)

We know great people are the foundation of our success. We provide employees
with a progressive work environment that enables and challenges them to give their
best every day. As part of our growth strategy and commitment to superior client
service, we welcomed many new faces to our team this year during a time when other
financial institutions were cutting back. Subsequent to year end, CWB was proud
to be recognized as having one of Canada’s 10 Most Admired Corporate Cultures™.
We were also recognized as one of the 50 Best Employers in Canada for the fifth
consecutive year.

Total Loans by Location of Security
(as of October 31, 2010)

Loan Distribution

Efficiency Ratio (teb) – Industry Comparison

British Columbia

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

67.2%

60.3%

62.8%

62.1%

60.9%

Alberta

48.6%

46.0%

44.6%

45.2%

48.2%

57.6%

44.1%

2005

2006

2007

2008

2009

2010

CWB (teb)

Average of the six largest Canadian banks (1)

(1) Average of the six largest Canadian banks is calculated based on information contained in the
publicly available company reports of the following (TSX Trading Symbols): BMO, BNS, CM,
NA, RY, and TD.

Saskatchewan

Manitoba

Ontario (& other)

33%

48%

10%

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 11

Total branch-Raised deposits(1)

+ 8%

$
6
,
6
0
8
m

i
l
l
i

o
n

$
6
,
1
1
2
m

i
l
l
i

o
n

s
n
o

i
l
l
i

M
$

$ 7,000

6,500

6,000

5,500

5,000

2009

2010

(1) Branch-raised deposits include deposits raised
through the Bank, CWT and Valiant Trust.

$ 4,000
5,000

2009

2010

Total demand and Notice deposits

$ 4,000

3,500

3,000

2,500

2,000

1,500

1,000

s
n
o

i
l
l
i

M
$

$
3
1
3
8
m

i
l
l
i

o
n

+ 12%

$
3

5
3
0
m

i
l
l
i

o
n

2009

2010

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CWB is pleased to now offer business and personal banking services through 39 branch
locations across Western Canada, including two new full-service commercial and
retail banking centres opened in the latter part of 2010. We plan to further expand
our branch network and are committed to investing in our physical infrastructure to
support sustained growth.

Sticking with our proven business plan continued to pay off in 2010, as we posted
record financial results despite the post-recessionary economic environment. CWB
had record earnings and revenues, solid loan growth and achieved our 90th consecutive
profitable quarter, a period spanning almost 23 years. We continued to grow while
maintaining our focus on profitable lending areas where we have proven expertise.
Our net interest income, which is the difference between what we earn on our loans
and investments and what we pay on deposits and other debt, represents the bulk
of our revenues. This increased significantly compared to last year and included the
positive impacts from improved market conditions and a more stable interest rate
environment. Non-interest income also increased due to solid business growth
complemented by an expanded offering of products and services. The benefits of
our strong credit discipline and secured lending practices also served us well through
the recessionary economic environment. We effectively managed troubled accounts
while limiting actual losses to levels well below other Canadian banks when measured
against total loans.

KNOWING WhAT WORKS

CWB was founded by entrepreneurs, and our client base today remains centred
on people who recognize both the opportunities and challenges of doing business
in Western Canada. Our commitment to personalized service means that we are
accessible, knowledgeable and hard working. Our lending process is not a cookie-
cutter approach. It’s about taking the time to listen to our customers and gain insight
into their business and personal banking needs. From there, we can make business
decisions that are good for our customers and smart for CWB.

provision for Credit losses (as a % of average loans)

1.2%

1.0

0.8

0.6

0.4

0.2

0.0

CWB
Average of the six largest Canadian banks (1)

0.53%

0.21%

2006

2007

2008

2009

2010

Composition of 2010 Total Revenues

75%
Net Interest
Income
25%
Other Income
Categories

expanding Market presence
(CWb Group)

» Banking Branches

across Western Canada

» Equipment Leasing Centre

headquartered in Winnipeg
(satellite offices across Canada)

» Trust Services Offices

Vancouver, Calgary, Edmonton,
Toronto

» Insurance Call Centres
Edmonton, Vancouver

» Wealth Management Office

Edmonton

Breakdown of Other Income Categories

8%
Credit related

5%
Insurance, net

4%
Trust and wealth
management

2%
Retail services

3%
Gain on sale
of securities

3%
Other

CANAdIAN
WeSTeRN
fINANCIAl

Canadian Western Financial (CWF), established in 1999, offers customers a wide
selection of third-party mutual fund investments. Clients can currently choose investment
products from over 30 different third-party fund companies that are accessed through
licensed representatives located in CWB branches across Western Canada. Our
representatives do not work on commission and only recommend investments that are
in the best financial interests of our clients. CWF provides an important investment
service for our banking clients, and we see ample opportunities to further expand
CWB Group’s personal investment products and wealth management services.

www.canadianwesternfinancial.com

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 13

CANAdIAN
dIReCT
fINANCIAl

www.canadiandirectfinancial.com

“In addition to offering competitive
rates and a host of client-friendly
products online, dealing with Canadian
direct financial gives our customers
confidence and security in knowing
they are dealing with a highly
respected Schedule I Canadian bank.”

Peter Morrison
Vice President
Marketing & Product Development
Canadian Western Bank

Canadian Direct Financial (CDF) is the Internet-banking division of
CWB launched in September 2008 to expand our personal banking
services to Canadians not conveniently located near a CWB branch.
Our service platform allows clients from all provinces and territories,
except Quebec, to take advantage of our competitive products, attractive
interest rates and commitment to strong customer support.

Some of the products currently offered by CDF include chequing accounts, savings
accounts and Guaranteed Investment Certificates (GICs) that are designed to help
our customers earn more from their money through better-than-average rates.
A Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA)
were launched this year under the name KeyReach®. We also introduced a unique
community-based savings product named the KeyGiving GIC®, where CDF makes a
donation based on every dollar invested to a designated children’s charity.

Our online banking strategy supports our objective to diversify and grow deposits
while providing customers with new ways to do business with us. In 2010, CDF
achieved deposit growth of 116% from October 31, 2009 based on a 122% increase
in the total number of clients. CDF’s business model was designed to support
significant growth, and we are well positioned to further expand our online banking
services to meet customer needs.

KNOWING WhAT WORKS

CDF began with the notion that our customer service can be outstanding whether
offered in person, over the phone or online. Customers access CDF through our
user-friendly website and are supported by a dedicated customer service team who
are ready to answer questions and provide personalized service when required.

Client & deposit Growth (Cdf)

)
s
n
o

i
l
l
i

m
$
(
s
t
i

s
o
p
e
d

$ 100

Deposit Growth Trend

Client Growth Trend

1,500

1,200

900

600

300

N
u
m
b
e
r
o
f
C

l
i

e
n
t
s

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

Oct-08

Oct-09

Oct-10

NATIONAl
leASING

National Leasing was acquired in February 2010 and is the newest
addition to CWB Group. Formed in 1977, the company is headquartered
in Winnipeg and has a presence across every region in Canada.
We are a leader in commercial equipment leasing for a broad range of
industries. While specializing in small and mid-sized transactions, we
offer competitive financing for individual deal sizes that range from
$5,000 to $1,000,000.

Our team of professionals are committed to building strong, long-term customer
relationships through responsive service. This commitment is just one of the reasons
why National Leasing is such a great fit with CWB Group. National Leasing’s
business success is also tied to the development and use of technology and software.
Our proprietary technology processes deals electronically, allowing us more time
to focus on customer needs. It also helps us control costs by minimizing bricks
and mortar infrastructure. This flexibility allows us to compete in a broad variety
of markets. Our combination of great service and fast response times for credit
applications give us a competitive edge.

In addition to financing general commercial equipment, we have particular expertise
in medical and dental, golf and turf, and agricultural equipment financing. As part of
our commitment to social responsibility, we also offer alternative energy financing.
We are currently the only leasing company in Canada to be ISO 9001:2000 certified,
which sets a standard for how we conduct business and ensures that we deliver a
superior level of quality and efficiency in our service.

National Leasing has realized many benefits since becoming a part of CWB Group.
Our ability to access the Bank’s more competitive cost of funds has enabled us to
expand our market reach as well as enhance margins on our existing business. Based
on our first nine months of performance since the acquisition date, our net income
was up 10% compared to the same period in the prior year. Our application volume
near the end of the year was also tracking at record levels despite continued economic
challenges. We are very optimistic about the future and plan to build on our existing
business while maintaining a diversified lease portfolio that strengthens our market
position and reduces overall risk.

KNOWING WhAT WORKS

We primarily partner with equipment vendors to help them secure financing for
their clients. Our dedicated team helps business people balance their equipment
and finance needs with flexible leasing options and competitive rates. Above all, our
business goal is to ensure that every client is given prompt, professional service.

www.nationalleasing.com

“Our representatives build relationships
with their customers and understand
the businesses we’re lending to. We use
this knowledge along with technology to
make credit decisions quickly, often in
a matter of minutes.”

Nick Logan
President
National Leasing

provincial breakdown of leases
(October 31, 2010)

Quebec

12%

Alberta

20%

Manitoba

30%

Ontario

14%

Saskatchewan

10%

Atlantic &
Other

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 15

CANAdIAN
WeSTeRN
TRuST

www.cwt.ca

“Our experienced and knowledgeable staff, coupled with flexible,
competitive pricing, make CWT the custodian of choice for
individuals, as well as small and medium-sized companies.”

–Adrian Baker, Chief Operating Officer, Trust Services

(CWT), acquired

Canadian Western Trust
in
1996, has offered retirement, trustee and custodial
solutions to financial advisors, corporations and
individuals for over 23 years. We currently operate
two distinct business units: Individual Retirement
and Investment Services (IRIS) and Corporate and
Group Services (CGS).

Through IRIS we provide a full range of trustee, custody and
record-keeping services for independent financial advisors,
mortgage brokers, individuals and group RRSP plans. IRIS
has approximately 46,000 accounts and over $3.2 billion of
assets under administration. Revenues in this business unit are
primarily based on fee income earned from the various account
and administrative services we provide.

CGS provides the same services to pension plans, custody
operations and investment managers. We also offer high-end tax
deferred products for small business owners and senior executives
of large corporations. We have about 650 direct clients through
CGS, representing over 150,000 employees/individuals and more
than $2.8 billion in assets under administration. Our revenues in
this business unit include both fee income and deposit interest.

With trust offices located in Vancouver, Calgary, Edmonton
and Toronto, we pride ourselves on being an industry leader
in today's ever-changing financial services environment. Our
Service You Can Trust® philosophy is centred on providing
customers a rapid response, strong attention to detail and a
flexible, solution-orientated approach. As demonstrated by our

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CWT Total Revenues(teb),(1) including Optimum Mortgage
($ millions)

s
n
o

i
l
l
i

M
$

$ 40

2006

2007

2008

2009

2010

(1) Total revenues(teb) for CWT represent net interest income plus other
income excluding changes in fair value of intercompany swaps.

account growth and new corporate appointments, more clients
are recognizing the value of CWT's service. With our continued
growth, we are also better able to capitalize on the benefits
that come with being a large provider of trust services. In 2010,
this helped us control expenses and enhance our services while
achieving strong revenue growth.

We operate in a very well-developed area of the financial services
industry and are positioned to deliver continued strong performance.
We earn additional business by taking market share from our
competitors, and we will continue to grow by remaining focused
on our service advantage and ability to quickly adapt to changing
client needs.

KNOWING WhAT WORKS

We recognize our clients as business partners and are committed
to providing them with unparalleled service and exceptional value.
Our growing market presence reflects our success in offering
relevant products and services that are designed to meet the
business objectives of our customers.

OpTIMuM
MORTGAGe

Optimum Mortgage (Optimum), established by CWB in 2004, is a
division of CWT that works directly with a network of over 8,500
mortgage brokers to provide residential mortgages throughout
Western Canada and within targeted regions of southern Ontario. We
offer mortgage brokers access to a variety of financing solutions for
their clients, such as alternative mortgages, conventional mortgages
and higher-ratio insured mortgages. Today, our team includes more
than 40 people who manage over 3,000 mortgages with a collective
book value of approximately $800 million.

Alternative, or Alt-A mortgages, are primarily offered to borrowers who have
difficulties confirming their income (i.e. self-employed individuals), and/or those
who are otherwise challenged to meet the lending guidelines of traditional mortgage
providers. At Optimum, we make credit decisions using our Sensible Lending®
philosophy, where every potential deal is carefully reviewed by one of our experts and
credit decisions are made based on the individual aspects of each application. There is
much more to consider when making a good lending decision than just an individual’s
debt ratios and credit scores. We help people secure competitive mortgage financing
by looking at a wide-range of factors, such as the value of the property, the amount of
down payment, and the borrower’s job or other sources of income.

Optimum had another strong year in 2010 led by 42% growth in total loans. Despite
economic challenges, the number of mortgage applications received established a new
record and was up 31% compared to last year. Looking forward, we expect to achieve
continued strong earnings and revenue growth as we approach $1 billion of total
loans. While we plan to maintain our primary focus on funding alternative mortgages,
we are also well positioned to add more insured mortgages to our portfolio.

KNOWING WhAT WORKS

Our personalized service and common-sense approach to underwriting has helped
Optimum build a strong reputation with our broker clients. When mortgage brokers
call, they know we will do everything possible to answer their questions quickly, and
they appreciate the fact that we do not operate with automated voice mail systems.
We take pride in our commitment to provide a timely response to all mortgage
applications, typically within 24 hours of receipt.

www.optimummortgage.ca

“We make lending decisions based on
our extensive experience and common-
sense approach. Mortgage brokers
appreciate our responsiveness and our
ability to offer solutions that close the
deal for their customers in a quick and
efficient manner.”

Lester Shore
Senior Assistant Vice President
Optimum Mortgage

Total Optimum Mortgage loans
($ millions)

$ 900
800
700
600
500
400
300
200
100
0

$
7
9
6
m

i
l
l
i

o
n

2006 2007 2008 2009 2010

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 17

VAlIANT
TRuST

www.valianttrust.com

five-Year Client Summary

+22
+8
+13

+19

+47

2010

2009
2008

2007

2006

167 clients
(prior to 2006)

300

270

240

210

180

150

120

s
t
n
e

i
l

C
f
o
r
e
b
m
u
N

The number of client appointments is a

primary driver of revenues and confirms
Valiant’s increased market presence.

Valiant Trust Company (Valiant) is a specialty trust company
providing stock transfer, corporate trust, escrow and employee plan
services to public and private corporations. Valiant was acquired by
CWB Group in 2004 and has since grown to become a national trust
service provider and federal deposit-taking institution with offices
in Vancouver, Calgary, Edmonton and Toronto. We set ourselves
apart by offering highly personalized, responsive and flexible service.
We are committed to building long-term business relationships
and our common-sense, down-to-business approach has given us
A Reputation for Getting Things Done®.

Our service offerings include acting as transfer agents and providing registrar services
for issuing and transferring securities, administering initial public offerings (IPO) and
new issues, security holder meeting services, facilitating mergers and acquisitions,
and disbursing dividends on behalf of our clients. Valiant also acts as corporate
trustee for investment funds, debt offerings, warrant issues and other structures. A
growing number of our clients rely on Valiant to hold cash, securities or other assets
under escrow agreements, administer shareholder rights plans and effectively manage
security holder and regulatory reporting, including SEDAR filing services.

Valiant’s long-term success and growth is largely dependent on our ability to help
clients communicate effectively and efficiently with their security holders and
regulatory bodies. While constrained capital markets activity and a low interest
rate environment have adversely impacted revenues, we continue to be successful
in earning the business of public and private companies from our competitors. We
increased our market presence to serve almost 300 companies through approximately 500
different client appointments in 2010.

Today, we maintain accounts for over 150,000 active registered holders. Our clients
have over 17 billion shares issued and outstanding, and we process more than 5,600
security registration transfers monthly. In the past five years, we have disbursed more
than $20 billion of cash entitlements to security holders on behalf of our clients.

Year
2010

2009

2008

2007

2006

KNOWING WhAT WORKS

# of Client Appointments
496

Backed by demonstrated expertise and strong Canadian ownership, Valiant is a true
alternative to our major foreign-owned competitors. We are approachable, innovative
and take pride in our ability to get things done.

468

440

433

390

“Our corporate clients know we are here for them and appreciate
our commitment to service and attention to detail.”

–Matt Colpitts, General Manager, Valiant Trust

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CANAdIAN
dIReCT
INSuRANCe

Canadian Direct Insurance (CDI) was acquired by CWB Group
in 2004 and provides personal auto, home and travel insurance at
competitive, direct prices. CDI was initially started in 1996 to offer a
price and customer service alternative to government auto insurance in
BC. Today, we offer auto and home insurance policies and third-party
travel insurance to residents across BC and Alberta.

Our insurance products are offered over the telephone by highly trained insurance
professionals located in both Vancouver and Edmonton. We also offer auto insurance
over the Internet and through select auto insurance brokers in BC. In 2010, we
further enhanced our insurance options to include secondary auto products such as
motorhomes, travel trailers, snowmobiles and ATVs.

We differentiate ourselves by providing great customer service. Our scores measuring
customer satisfaction consistently exceed 90%, and ratings for a positive experience
during a claims process are at 98%. We are one of the fastest growing insurance
companies in Western Canada in terms of sales volume, and our customers frequently
refer us to their family and friends based on their positive experiences and the money
they save.

CDI was pleased to report record financial performance in 2010, and we are optimistic
about our potential as we continue to increase brand awareness and build on our
reputation. Looking forward, we believe our continued growth will be led by performance
in the Alberta auto business and ongoing success in our broker distribution channel in
BC. Our goal is to achieve a balanced book that is equally represented by each of our
business lines in Alberta auto, BC auto and home insurance.

KNOWING WhAT WORKS

We deal directly with customers to keep our prices competitive while providing excellent
customer service. Our insurance professionals have in-depth knowledge of our
products so they can offer reliable insurance advice. Another one of our goals is to
make things easy for our customers by ensuring our claims process is as efficient and
hassle-free as possible.

CdI Highlights
Policies
outstanding

Gross written
premiums (000’s)

2006

2007

2008

2009

2010

159,965

164,263

168,071

175,662

185,107

$100,227

$104,829

$107,054

$116,828

$124,451

Net income (000’s)

$6,940

$7,773

$8,372

$9,111

$12,388

www.canadiandirect.com

“Canadian direct has a solid
reputation for taking care of its
customers. Our excellent customer
service combined with competitive
rates and our hassle-free claims
process has positioned us as a
leader in auto and home insurance.”

Brian Young
President and CEO
Canadian Direct Insurance

2010 Gross Written premiums
by product line

+ A B ) 37% A

me Insurance ( B

o
H
%
9
2

r
t

u
t

u to

% British Columb i a A

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 19

AdROIT
INVeSTMeNT
MANAGeMeNT

www.adroitinvestments.ca

“Clients choose us because they value our personalized service
and conservative investment approach. We evaluate each
client’s situation and build an investment portfolio that reflects
their specific needs, including consideration for both potential
return and risk.”

–David Schuster, President and CEO, Adroit Investment Management

Adroit Investment Management (Adroit), established in
1993, was acquired by CWB Group in December 2008.
Adroit is an Edmonton-based investment counselling firm
with assets under management approaching $1 billion.

Our team of experienced investment professionals specialize in
wealth and portfolio management for high net worth individuals,
corporations and institutional clients, including non-profit
organizations, colleges, foundations and endowment funds. Our
business success is built on high ethical standards, conservative
growth principles and strong investment performance. We focus
on building and maintaining wealth for our clients by performing
an in-depth analysis of every investment we make on their behalf.
Our investment managers meet one-on-one with clients to tailor an

Cumulative Value of $100 Invested on October 31, 2000

Adroit Canadian Equity Portfolio
S&P/TSX Composite Index

$ 300

250

200

150

100

investment portfolio that fits their unique needs and circumstances.
Our commitment to maintaining good communication was
particularly important in 2008 and 2009 when market prices
were most volatile. As financial markets continue to recover, we
believe new and existing clients will recognize even more value
from the type of conservative wealth management solutions we
offer. Our door is always open, and we welcome clients who
are looking for a proven alternative to help them manage their
investments and plan for the future.

Although wealth management still represents a relatively small
part of CWB Group, we believe there are great opportunities for
us to further expand our reach in this area. We recognize there
are many CWB clients who could benefit from Adroit’s expertise,
and we will continue to build awareness in this regard. We have
also enhanced our business development practices and expect
this will continue to show positive results in the future. While
Adroit currently has good brand recognition in the Edmonton
area, our goal over time is to have better representation in all
major markets, including Vancouver, Edmonton, Calgary and
Winnipeg. While our immediate growth plans are based on growing
in-house, we are also evaluating opportunities to expand our
presence through acquisition.

KNOWING WhAT WORKS

Our strong investment discipline includes choosing the right asset
mix for each individual client and maintaining a diverse range of
high quality investments. Our strategies allow us to closely manage
risk while maximizing the potential returns for our clients.

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CORpORATe SOCIAl
ReSpONSIbIlITY

Our reputation goes beyond our products, services, financial performance
and positive contributions to economic growth. At CWB Group, we are
known for our commitment to our customers, employees, communities and
the environment.

It’s about our people

We have employees who just started their careers
with CWB Group, an employee who has been
with us since our very first day of operations more
than 26 years ago, and all tenures in between.
CWB Group is proud to be an employer of choice
to more than 1,800 people.

This Corporate Social Responsibility (CSR) section highlights how CWB
Group has integrated good corporate citizenship into our daily operations.
For the first time, CWB Group will also report on its economic, social
and environmental performance through an expanded CSR Report to be
published in the spring of 2011. The report will be prepared in accordance
with Global Reporting Initiative (GRI) Sustainability Guidelines and federal
Public Accountability Statement (PAS) Guidelines, and is consistent with our
commitment to transparency and continuous improvement.

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 21

50+

tHe nUmBer of Different
commUnitieS WHere cWB
groUp emploYeeS live,
WorK anD plaY

$475,000+

tHe Dollar amoUnt DonateD
to YoUtH anD cHilDren’S
cHaritieS over tHe paSt tWo
YearS tHroUgH THE GREATER
INTEREST GIC® anD
tHe KEY GIVING GIC®

tHe nUmBer of cWB
BUSineSS anD perSonal
BanKing BrancHeS acroSS
WeStern canaDa

Strong economic impact

CWB Group supports responsible economic growth, as it drives our performance
and enhances the well being of our customers, employees and communities.
We serve hundreds of thousands of business and personal clients every year, and the
loans, deposits and other services we provide help them grow their businesses and
meet their personal financial and insurance needs. We now employ over 1,800 people
who live in more than 50 different communities across Canada, and the salaries and
benefits paid by CWB Group help them reinvest into their local communities. In
2010, CWB Group paid more than $123 million in salaries and benefits to employees.

The branches and offices we build and operate drive economic activity through
the taxes we pay and the local businesses we support with the purchase of goods
and services. Last year, CWB Group paid over $50 million in government taxes,
including more than $30 million in federal income taxes and nearly $20 million in
provincial income and capital taxes. Office leasing and maintenance costs totaled over
$19 million, while office supply purchases and travel costs amounted to $1.2 million
and $1.6 million, respectively.

Total Federal and Provincial Income and Capital Taxes Paid ($ thousands)

$ 46,180

$ 46,130

$ 50,502

$ 44,033

$ 42,453

$229.3 million paid in the last 5 years

2006

2007

2008

2009

2010

tHe montHlY Service fee for
YoUtH anD poSt-SeconDarY
StUDentS, aS Well aS Senior
citiZenS WitH GOLD LEAF
PLUS® accoUntS

improving acceSS to financial ServiceS

To provide greater access to basic banking services, CWB provides a flexible,
low-cost chequing account for as little as $4 per month. Moreover, we waive the
monthly account fee for youth, as well as students pursuing a post-secondary
education. Senior citizens do not pay service fees for our Gold Leaf Plus® account.
We also offer them the option of receiving monthly interest payments on their
GICs and reduced fees for safe deposit box rentals. To ensure accessibility, all of
our branches are wheelchair friendly and include sit-down banking alternatives. We
give customers more choices by offering many services online or over the telephone.
Through our highly diverse group of employees, CWB Group can serve customers in
nearly 50 different languages.

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

GIVING BACK TO OuR COMMuNITIES

CWB Group gives back to communities where our employees and customers live,
work and play. Last year we invested more than $1 million in charitable donations
and sponsorships in three targeted areas of giving: education; community and civic
services; and health and wellness.

CWB has created a unique community-based personal investment product that gives
customers a competitive return on their guaranteed investments while helping youth
and children’s charities. For every dollar our clients invest in The Greater Interest
GIC®, CWB makes a donation of 1/8 % back to the community where the deposits
were raised. CDF introduced a similar community-based investment product in 2010
named the Key Giving GIC®. Over the past two years, these initiatives have resulted in
a combined donation of more than $475,000 being distributed to numerous chapters
of Big Brothers Big Sisters, and to the Youth Emergency Shelter Society in Edmonton.

Beyond sponsorships and donations, volunteerism is a core part of our culture and
CWB Group employees support numerous causes that are close to their hearts.
Our Western Spirit program allows employees who volunteer their time in the
community to apply for an annual $250 grant, where CWB will make a donation on
their behalf to a charity of their choice. In our Funds for Fundraiser program, CWB
matches the dollars our employees raise for fundraising campaigns. CWB Group
and our employees also actively support the United Way with numerous initiatives
throughout the year.

CWb Group has a commitment to
delivering products and services that
not only meet our customers’ needs,
but also strengthen our commitment
to society and community.

CWb Group supports hundreds of
charities in the communities where we
live, work and play, including the Youth
emergency Shelter of edmonton.

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 23

“We help finance change by
embracing principles of sustainable
development: change that will allow
our partners and clients to meet
the needs of the present without
impacting the ability of future
generations to meet their own needs.”

Grant Arbuckle
Senior Consultant
National Leasing

eco Audit

This Annual Report uses FSC certified
paper that comes from well-managed
forests. The paper used for the report cover
contains Mixed Sources Recycled, and the
paper used for the report contains 100%
Post Consumer Recycled fibre instead of
virgin paper and is produced using wind
power. As a result, the following savings to
our natural resources were realized:(1)

TREES SAVED
223

WOOD SAVED
32 Tons

ENERGY NOT CONSUMED
71 (Million BTu’s)

NET GREENHOUSE
GASES PREVENTED
21,201 (lbs. Co2 Equiv.)

WASTE WATER
102,111 (Water Saved gals.)

SOLID WASTE
6,199 (Landfill Reduced lbs.)

(1) Eco audit information is based on use of the following
products: 169,000 sheets of 23 x 35 Envirographic100,
60lb Text, 102M. Data research provided by
www.environmentaldefence.org

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

PROTECTING ThE ENVIRONMENT

CWB Group is sensitive to our role as environmental stewards and we consider this
in the development of our products and services, our lending polices and our daily
business practices.

CWB Group has many initiatives in place to reduce the environmental impact of our
daily operations and services. We try to minimize our carbon footprint and reduce the
need for air travel by using teleconferencing and web-conferencing wherever possible.
We have employee-driven teams across our various businesses that share new ideas
about responsible environmental practices such as office recycling programs and
cleanup initiatives in our cities. Most of our business lines offer customers the choice
of paperless statements, online services and paperless record-keeping. CDI and
National Leasing both use technology to manage a paperless office environment, and
CWT is currently in the process of implementing similar technology.

CWB recently initiated a partnership with the Northern Alberta Institute of
Technology (NAIT) Architectural Technology program to increase sustainability in
our building designs and construction. This includes identifying new technologies,
evaluating their feasibility and using this information to design a new multi-storey
building for CWB’s largest branch, to be located in Edmonton. We are also using
other technologies to become more efficient and minimize our environmental
impact. One example is the construction of our new data centre at CWB’s
corporate office, which incorporates green principles to improve cooling and reduce
electricity consumption.

CDI was the first insurance company in Canada to offer a premium discount for
hybrid/fuel-efficient automobiles. National Leasing also has a number of products and
tools that support environmental sustainability. Their Green Earth Solutions™ program
allows clients to reduce their carbon footprint while preserving capital. They promote
energy efficiency to businesses by leasing equipment related to renewable energy
initiatives and energy-efficient building projects. In fact, National Leasing was
recognized as one of the Top 30 Green Companies in Canada for its success in reducing
the company’s impact on the environment.

CWB also considers potential environmental impacts when making lending decisions.
Lenders evaluate possible environmental risks as part of the credit-granting process,
and we work closely with our clients to identify if there are any issues in this area.
If environmental risks are identified that cannot be mitigated to the Bank’s satisfaction,
the lending application is declined.

ENGAGING OuR EMPLOYEES

CWB Group has always put its people first, recognizing that great employees are
the key to our success. While many organizations like to say that their people are
their greatest asset, at CWB Group, we truly mean it. Our approach has attracted
dynamic, caring individuals who are responsive to our customers. Each individual
plays an important role in CWB Group’s collective success, and we recognize them
for their invaluable contributions. We hire for attitude and our people come to work
eager to make a difference for our customers. In turn, we provide a rewarding career,
competitive salaries and excellent benefits.

CWb Group employees (number of full-time equivalent staff)

s
e
e
y
o
p
m
E
f
o
r
e
b
m
u
N

2,000

1,700

1,400

1,100

800

500

2000

2002

2004

2006

2008

2010

The total number of full- and part-time employees at CWB Group increased by
384 people in 2010 to reach 1,828. While the majority of new employees this year
came to CWB Group through the acquisition of National Leasing, we continued to
welcome many new team members across the organization. We announce with pride
that CWB Group has never laid off an employee, even through the most challenging
economic times.

There are several unique benefits we offer to attract and retain employees. Our
CWbalance® program promotes a healthy work/life balance and, among other benefits,
provides an extra paid day off for each employee every year. Our Employee Share
Purchase Plan (ESPP) is one of the best in the industry and encourages employee
ownership of CWB shares. Currently, more than 94% of CWB Group employees are
shareholders through participation in the ESPP. Referrals are the best compliment
and our employee referral program is one of our most successful forms of employee
recruitment. To date, we have received almost 99 referrals from employees and made
66 hires because of those referrals.

In September 2009, we launched the CWB Learning Centre internal website to
provide management and leadership training, as well as educational opportunities
through webinars and online learning. CWB Group invested more than $1 million in
career development and training in 2010.

While we are proud of our people and how we support them, we are humbled by the
external recognition we have received for our approach. CWB was recognized as one
of Canada’s 50 Best Employers for the fifth consecutive year. The Bank also received
recognition as one of Canada’s 10 Most Admired Corporate Cultures™. National
Leasing was named one of Canada’s 50 Best Managed Companies for the 16th year in a
row and one of the 50 Best Small and Medium Employers in Canada for the fourth time
in as many years.

Since 2007, CWB has been selected
as one of the 50 Best Employers
in Canada five times, ranking 27th
for the 2011 survey.

National Leasing has been recognized
as one of Canada’s 50 Best Managed
Companies for 16 straight years.

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 25

CORpORATe
GOVeRNANCe

Corporate Governance Highlights

» The Board is led by a

non-executive chairman.

» 10 out of the 11 current directors

are independent.

» The independent directors set

aside time for discussion with no
management present at each meeting
of the Board and its Committees.

» Shareholders vote for individual

directors, not a slate.

» The Board has adopted “say on pay”
to give shareholders an advisory
vote on CWB Group’s approach to
executive compensation.

» The Bank has adopted a minimum
share ownership requirement for
directors and executive management
that is designed to align their
interests with those of shareholders.

» The Board evaluates, in alternating
years, the effectiveness of each
director and the Board as a whole
through a written assessment and
feedback process.

» There are written mandates for the
Board and each Board Committee,
together with mandates for the
Chairman of the Board and the
Chairs of the Board Committees,
each of which is reviewed annually.

» The Bank maintains whistleblower

procedures through which
complaints or concerns regarding
questionable audit or accounting
matters may be made.

KNOWING WHAT WORKS
CWB Group 2010 Annual Report

CWB Group is committed to sound and effective corporate governance.
Our experienced Board of Directors (the Board) works closely with
management to ensure operations are both effective and efficient within
a continuously evolving regulatory environment. Policies are reviewed
regularly and are designed to effectively supervise management while
creating long-term value for shareholders.

The Board continues to monitor governance best practices. In fiscal 2009, a director
election policy was adopted to allow shareholders to vote for individual directors, as
opposed to a slate. In fiscal 2010, the Board approved the adoption of a non-binding
advisory vote on CWB Group’s approach to executive compensation, commonly
referred to as a “say on pay” resolution.

The Board approves all major strategy and policy recommendations for CWB Group
and must be satisfied that management is maintaining a culture of integrity throughout
the organization. CWB Group has codes of conduct for all directors, officers and
employees. The Board monitors compliance with these codes by requiring each
individual to annually sign a certificate confirming his/her understanding of, and
compliance with, what is formally expected of them.

The Board is responsible for stewarding CWB Group’s growth, which includes
identifying the organization’s key risks and ensuring appropriate systems are in place
to manage these risks. Part of this responsibility involves a review and approval at
least once a year of a strategic plan that takes into account both the current and
expected opportunities and challenges of all CWB Group’s businesses.

Overview of Corporate Governance Structure

A
P
P
O

››››››

N
T

Shareholders’ Auditor

›
›
›
›
›
›

REPORT

››››››

A
P
P
O

N
T

››››››

Audit Committee

Loans Committee

Human Resources
Committee

Governance
Committee

››››››

T
N

O
P
P
A

››››››

Shareholders

›
›
›
›
›
›

ELECT

Board of Directors

APPOINT

›
›
›
›
›
›

Management

for More Information
Additional information about CWB Group’s corporate governance may be obtained through:

Proxy Circular

The annual proxy circular contains information on each director and a detailed discussion of the responsibilities of the Board
and each Board Committee as well as a description of CWB’s corporate governance practices.

CWB Group Website

The Corporate Governance section of the CWB Group website contains information on our corporate governance practices,
including the mandate of the Board, the mandates of each of the Board Committees, the Personal and Business Conduct Policy for
CWB Group’s officers and employees, and the Personal and Business Conduct Policy for directors.

Annual Meeting

Shareholders are invited to attend the annual meeting of shareholders on March 3, 2011 in Edmonton, Alberta.

bOARd COMMITTeeS

Committee

Members

Responsibilities

Audit Committee

Governance
Committee

Loans Committee

human Resources
Committee

Robert A. Manning (Chair)
Wendy A. Leaney
Gerald A.B. McGavin
Robert L. Phillips
Alan M. Rowe

» Oversees the integrity of the CWB Group's financial reporting,

internal controls, disclosure controls and internal audit
function.

» Recommends the appointment of the external auditors

and oversees the whistleblower procedures.

Albrecht W.A. Bellstedt (Chair)
Allan W. Jackson
Wendy A. Leaney
Robert A. Manning
Raymond J. Protti

» Reviews and monitors corporate governance trends

and best practices on an ongoing basis.

» Monitors procedures regarding related party transactions,
conflicts of interest, standards of business conduct, the
handling of customer complaints, and recommends director
compensation and director succession.

Gerald A.B. McGavin (Chair)
Allan W. Jackson
Albrecht W.A. Bellstedt
Wendy A. Leaney
howard E. Pechet
Robert L. Phillips
Larry M. Pollock
Raymond J. Protti
Alan M. Rowe
Arnold J. Shell

Alan M. Rowe (Chair)
Allan W. Jackson
Robert A. Manning
Arnold J. Shell
howard E. Pechet
Robert L. Phillips
Arnold J. Shell

» Oversees the documentation, measurement and

management of credit risk.

» Approves, declines or recommends approval to the Board

of all credit applications in excess of a specified limit.

» Approves executive compensation and incentive

compensation plans.

» Oversees CEO performance assessment and senior

management succession.

KNOWING WHAT WORKS

CWB Group 2010 Annual Report 27

table of contents
28 Business Profile And strAtegy

31 grouP finAnciAl PerformAnce

31 Overview
34 Net Interest Income
35 Other Income
37 Non-Interest Expenses

and Efficiency

38 Income and Capital Taxes
39 Comprehensive Income
40 Cash and Securities
40 Loans
42 Credit Quality
46 Deposits
48 Other Assets

and Other Liabilities
48 Liquidity Management
52 Contractual Obligations
52 Capital Management

56 Financial Instruments

and Other Instruments

57 Acquisitions
58 Off-Balance Sheet Arrangements

58 oPerAting segment review

58 Banking and Trust
61 Insurance

62 summAry of QuArterly results

73 Operational Risk
74 General Business

and Economic Conditions

74 Level of Competition
74 Regulatory and Legal Risk
74 Accuracy and Completeness

of Information on Customers
and Counterparties

74 Ability to Execute Growth

63 Accounting Policies And estimAtes

Initiatives

63 Critical Accounting Estimates
65 Changes in Accounting Policies
65 Future Changes in Accounting

Policies

68 risk mAnAgement

68 Overview
69 Credit Risk
70 Liquidity Risk
70 Market Risk
72 Insurance Risk

74 Information Systems
and Technology
75 Reputation Risk
75 Other Factors

75 uPdAted shAre informAtion

75 controls And Procedures

ManageMent’s Discussion anD analysis

BUSINESS PROFILE AND STRATEGY
Canadian Western Bank (CWB or the Bank) offers a diversified range of financial services and is the largest publicly traded
Canadian bank headquartered in Western Canada. The Bank, along with its subsidiaries, National Leasing Group Inc. (National
Leasing or NL), Canadian Western Trust Company (CWT), Valiant Trust Company (Valiant), Canadian Direct Insurance
Incorporated (Canadian Direct or CDI), Adroit Investment Management Ltd. (Adroit) and Canadian Western Financial Ltd.
(CWF), currently operate in the financial services areas of banking, trust, insurance and wealth management. The Bank remains
primarily focused on its core business lending and retail banking services in Western Canada. NL specializes in commercial
equipment leasing for small and mid-sized transactions and is represented across Canada. CWT provides trust services, including
self-directed RRSPs and RRIFs, as well as corporate and group trust services to independent financial advisors, corporations and
individuals. CWT also underwrites residential mortgages through its operating division, Optimum Mortgage. Valiant’s operations
include stock transfer and trustee services to public companies. CDI provides personal auto and home insurance to customers in
British Columbia (BC) and Alberta. Adroit specializes in wealth management for individuals, corporations and institutional clients.
Third party mutual funds are offered through CWF, the Bank’s mutual fund dealer subsidiary.

CWB’s mission is to be known and respected as Canada’s business bank, providing Western Canada and other select markets with
a preferred source of financial services. The fundamental objectives are to provide shareholders with a sound and profitable return,
clients with value, service and stability, and employees with a positive and rewarding work environment, while contributing to the
communities in which CWB operates. CWB plans to achieve its mission through the following strategic priorities:

· maintain a conservative risk profile while ensuring growth is focused, strategic and accretive for shareholders;

· reinforce leadership in cost efficiency and low credit losses by enhancing service delivery capabilities and maintaining strong

discipline in managing the Bank’s lending portfolio;

leverage core profitability and further diversify funding sources with ongoing generation of internal deposits raised through the
branch network, CWT, Valiant and over the Internet;

improve CWB’s revenue diversification by further developing non-interest revenue sources in banking, trust, insurance and
wealth management operations through internal growth as well as strategic acquisitions;

· support return on common shareholders’ equity (ROE) by maintaining strong operating performance, an efficient capital
structure, and continued diversification into businesses with lower capital requirements, including residential mortgages,
small-ticket leases, insurance, trust services and wealth management. Organic growth and resulting benefits to ROE may
be accelerated by acquisitions that are both accretive and a good strategic fit with current operations;

knowing whAt works
CWB Group 2010 Annual Report

· recruit, develop and retain high quality employees who embrace the Bank’s culture by offering a rewarding work environment
that includes comprehensive employee benefits, career growth opportunities, a focus on work/life balance and competitive
compensation packages. CWB believes that such employees are critical to build and maintain competitive advantages related
to offering superior customer service and relationship-based banking; and,

further build and reinforce CWB’s reputation and public confidence through continued stakeholder communication, diligence
in corporate governance practices and high standards in corporate reporting and accountability.

CWB’s consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting
principles (GAAP) and are presented in Canadian dollars.

The following pages contain management’s discussion of the financial performance of CWB, as well as a discussion of the
performance of each operating segment and a summary of quarterly results. Additional information relating to the Bank, including
the Annual Information Form, is available on SEDAR at www.sedar.com and on the Bank’s website at www.cwbankgroup.com.

Forward-Looking Statements

From time to time, Canadian Western Bank (the Bank) makes written and verbal forward-looking statements. Statements of
this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities
regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include,
but are not limited to, statements about the Bank’s objectives and strategies, targeted and expected financial results and the outlook
for the Bank’s businesses or for the Canadian economy. Forward-looking statements are typically identified by the words
“believe”, “expect”, “anticipate”, “intend”, “estimate”, “may increase”, “may impact”, “goal”, “focus”, “potential”, “proposed”
and other similar expressions, or future or conditional verbs such as “will”, “should”, “would” and “could”.

By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and
uncertainties, which give rise to the possibility that the Bank’s predictions, forecasts, projections, expectations and conclusions
will not prove to be accurate, that its assumptions may not be correct and that its strategic goals will not be achieved.

A variety of factors, many of which are beyond the Bank’s control, may cause actual results to differ materially from the
expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and
economic conditions in Canada, including the volatility and lack of liquidity in financial markets, fluctuations in interest rates
and currency values, changes in monetary policy, changes in economic and political conditions, legislative and regulatory
developments, legal developments, the level of competition in the Bank’s markets, the occurrence of weather-related and
other natural catastrophes, changes in accounting standards and policies, the accuracy of and completeness of information the
Bank receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and
integrate acquisitions, reliance on third parties to provide components of the Bank’s business infrastructure, changes in tax laws,
technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction
of new products, and management’s ability to anticipate and manage the risks associated with these factors. It is important to note
that the preceding list is not exhaustive of possible factors.

Additional information about these factors can be found in the Risk Management section of this Management’s Discussion
and Analysis (MD&A).

These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-
looking statements as a number of important factors could cause the Bank’s actual results to differ materially from
the expectations expressed in such forward-looking statements. Unless required by securities law, the Bank does not undertake
to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.

Assumptions about the performance of the Canadian economy in 2011 and how it will affect CWB’s businesses are material
factors the Bank considers when setting its objectives. In setting minimum performance targets for fiscal 2011, management’s
assumptions include:

· moderate economic growth in Canada aided by positive relative performance in the four western provinces;

· relatively stable energy and commodity prices;

· sound credit quality with actual losses remaining within the Bank’s historical range of acceptable levels, including consideration

for National Leasing;

· modest inflationary pressures and gradual increases in the prime lending interest rate beginning in early to mid-calendar year 2011; and

· a relatively stable net interest margin supported by a low deposit cost environment, favourable yields on both new lending facilities

and renewed accounts, and relatively stable investment returns reflecting high quality assets held in the securities portfolio.

knowing whAt works

CWB Group 2010 Annual Report 29

Taxable Equivalent Basis (teb)

Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest
income. Net interest income (as presented in the consolidated statements of income) includes tax-exempt income on certain
securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a
loan or security of the same amount. The adjustment to taxable equivalent basis of $11.2 million (2009 – $7.8 million) increases
interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the
statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not be
comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on
a taxable equivalent basis throughout this MD&A.

Non-GAAP Measures

Taxable equivalent basis, return on common shareholders’ equity, return on assets, diluted cash earnings per share, efficiency ratio,
net interest margin, tangible common equity to risk-weighted assets, Tier 1 and total capital adequacy ratios, average balances,
claims loss ratio, expense ratio and combined ratio do not have standardized meanings prescribed by GAAP and, therefore, may
not be comparable to similar measures presented by other financial institutions. The non-GAAP measures used in this MD&A are
calculated as follows:

· taxable equivalent basis – described above;

· return on common shareholders’ equity – net income after preferred share dividends divided by average common shareholders’

equity;

· return on assets – net income after preferred share dividends divided by average total assets;

· diluted cash earnings per share – diluted earnings per common share excluding the after-tax amortization of acquisition-related

intangible assets;

· efficiency ratio – non-interest expenses divided by total revenues (net interest income plus other income);

· net interest margin – net interest income divided by average total assets;

· tangible common equity to risk-weighted assets – shareholders’ equity less subsidiary goodwill divided by risk-weighted assets,
calculated in accordance with guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI);

· Tier 1 and total capital adequacy ratios – in accordance with guidelines issued by OSFI;

· average balances – average daily balances;

· claims loss ratio – net insurance claims and adjustment expenses as a percentage of net earned premiums;

· expense ratio – policy acquisition costs and non-interest expenses net of commissions and processing fees as a percentage of net

earned premiums; and,

· combined ratio – sum of the claims loss and expense ratios.

knowing whAt works
CWB Group 2010 Annual Report

GROUP FINANcIAL PERFORmANcE

overview

Highlights of 2010 (compared to 2009)

· Record net income of $163.6 million, up 54%.

· Record diluted earnings per common share of $2.05, up 39%.

· Record total revenues (teb) of $434.3 million, up 32%.

· Net interest margin (teb) of 2.74%, up 64 basis points.

· Return on common shareholders’ equity of 17.1%, up 390 basis points.

· Return on assets of 1.24%, up 38 basis points.

· Loan growth of 14%, reflecting both organic growth and the acquisition of NL.

· Sound credit quality with a provision for credit losses of 21 basis points measured as a percentage of average loans.

· Efficiency ratio (teb) of 44.1%, a 410 basis point improvement.

· Marked 90 consecutive quarters of profitability.

· Tier 1 capital ratio of 11.3%, unchanged from 2009.

· Tangible common equity to risk-weighted assets ratio of 8.5%, up from 8.0%.

· Total capital ratio of 14.3%, down from 15.4%.

· Completed the acquisition of National Leasing, effective February 1, 2010.

· Achieved record net income in the insurance segment.

· Opened new full-service commercial and retail banking centres in Sherwood Park, Alberta and Surrey, BC.

· Surpassed $6 billion of assets under administration in CWT.

· Cash dividends of $0.44 per share paid to common shareholders.

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CWB Group 2010 Annual Report 31

Table 1 – SelecT annual Financial inFormaTion(1)
($ thousands, except per share amounts)

Key Performance Indicators
Net income

Earnings per share

Basic

Diluted
Diluted cash(1)

Provision for credit losses as a percentage of average loans
Net interest margin (teb)(1)

Net interest margin
Efficiency ratio (teb)(1)(3)

Efficiency ratio

Return on common shareholders’ equity

Return on average total assets

Other Financial Information
Total revenues (teb)

Total revenues

Total assets

Subordinated debentures

Dividends

2010

2009

2008

Change from 2009

163,621 $ 106,285 $ 102,019 $

57,336

54%

2.26

2.05

2.09

0.21%

2.74

2.64

44.1

45.3

17.1

1.24

1.51

1.47

1.49

0.15%

2.10

2.03

48.2

49.4

13.2

0.86

1.61

1.58

1.59

0.15%

2.30

2.25

45.2

46.1

15.9

1.03

434,259 $ 327,966 $ 298,857 $ 106,293
102,954
423,073

320,119

293,186

12,701,691

315,000

0.44

11,635,872

10,600,732

1,065,819

375,000

(60,000)

0.44

0.42

–

0.75

0.58

0.60

6bp(2)

(410)

390

32%

(16)

–

(1) See page 30 for a discussion of teb and non-GAAP measures.
(2) bp – basis points.
(3) A decrease in the ratio reflects improved efficiency, while an increase reflects deterioration.

Net income surpassed the $150 million milestone for the first time to reach a record $163.6 million, a 54% ($57.3 million) increase
over 2009 despite continued challenges related to Canada’s post-recessionary environment. Diluted earnings per common share was
$2.05 ($2.26 basic), up 39% from $1.47 ($1.51 basic) in the prior year. Record total revenues (teb) grew 32% to reach $434.3 million,
driven by a 64 basis point recovery in net interest margin (teb) to 2.74%, 14% ($1,260 million) growth in total loans and a 15% ($14.0
million) increase in other income. Margin expansion in the year was mainly due to lower deposit costs, more favourable yields on fixed
rate loans, a shift in the deposit mix and lower liquidity levels. More favourable yields on fixed rate loans reflect the positive impact from
NL’s comparatively higher yielding lease portfolio as well as wider spreads on certain product lines, particularly early in the year. Credit
quality was satisfactory and the provision for credit losses as a percentage of average loans remained relatively low at 21 basis points.
The second quarter acquisition of NL materially benefited all performance metrics except the provision for credit losses. Compared to
the Bank’s core lending business, National Leasing’s portfolio earns a higher yield that more than compensates for its relatively higher
loan loss experience due to the nature of its business. The efficiency ratio (teb), which measures non-interest expenses as a percentage
of total revenues (teb), of 44.1% improved 410 basis points from last year and established a new benchmark. The improvement in the
efficiency ratio (teb) reflects very strong growth in total revenues mainly due to margin expansion, loan growth and strong other income
which more than offset a 21% ($33.3 million) increase in non-interest expenses. The acquisition of NL contributed $20.1 million of the
year-over-year increase in non-interest expenses, with the remainder attributed to additional staff complement and ongoing investment
in premises and technology infrastructure to support continued business growth. Return on common shareholders’ equity of 17.1% was
up 390 basis points compared to 2009 while return on assets increased 38 basis points to 1.24%. The significant improvement in key
profitability ratios was due to the factors already noted, partially offset by lower gains realized on the sale of securities. Realized gains on
sale of securities were exceptionally high in the prior year and first two quarters of 2010 primarily resulting from transactions related to
favourable pricing on certain high quality debt investments which arose from effects of the global financial crisis. Total cash dividends
paid to common shareholders of $0.44 per share were unchanged from the prior year.

Total assets increased 9% to reach $12,702 million primarily driven by loan growth. While all primary lending sectors recorded positive
growth in the year, lending activity was constrained in certain areas by challenges related to lingering recessionary impacts and the repayment of
existing accounts. The impact of negative growth in real estate construction loans was more than offset by very strong results in commercial
mortgages, while the acquisition of NL had a significant positive impact on the equipment financing portfolio. Loan growth was achieved
across each of the Bank’s geographic regions, although activity in BC provided the strongest volume of new loans. Loans in the Bank’s
residential mortgage business, Optimum Mortgage, increased 42% and comprised approximately 8% of total loans at fiscal year end.

Total branch-raised deposits increased 8% ($496 million) compared to the previous year, while the demand and notice component
within branch-raised deposits was up 12% ($392 million). The demand and notice component comprised 33% of total deposits at

knowing whAt works
CWB Group 2010 Annual Report

October 31, 2010, unchanged from a year earlier. Growth in demand and notice deposits reflects ongoing execution of strategies to
further enhance and diversify the Bank’s core funding sources as well as CWT’s success in generating deposits through its fiduciary
trust business. Total branch deposits measured as a percentage of total deposits were 61% at October 31, 2010, compared to 64%
a year earlier with the decrease mainly reflecting fixed rate term deposits raised through the deposit broker network to meet the
funding requirements of NL, partially offset by the above-noted growth in branch-raised deposits.

The Bank’s objective is to maintain a strong and efficient capital base. The Tier 1 and total capital ratios at October 31, 2010 of
11.3% and 14.3%, respectively, remained well above internal and regulatory minimums. This capital position provides flexibility
to pursue strategic growth opportunities and manage through any unforeseen challenges. Management believes the forthcoming
changes to regulatory capital standards known as “Basel III” should be relatively straightforward to manage given the lack of
complexity in the Bank’s current composition of regulatory capital. In November 2010, subsequent to year end, the Bank issued
$300 million and redeemed $70 million of subordinated debentures. Including the impact of these transactions, the pro forma total
capital ratio at October 31, 2010 was 16.4%.

Table 2 – PerFormance TargeTS
The performance target ranges established for the 2010 fiscal year, together with actual performance, and new minimum target
ranges for fiscal 2011 are presented below:

Net income growth(1)
Net income growth, before taxes (teb)(2)

Total revenue (teb) growth

Loan growth

Provision for credit losses as a percentage of average loans

Efficiency ratio (teb)
Return on common shareholders’ equity(3)
Return on assets(4)

2010

Minimum

Targets

2010
Performance

2011

Minimum

Targets

12%

n/a

0.15 – 0.20

0.90

54%

0.21

44.1

17.1

1.24

0.20 – 0.25

1.20

(1) Net income, before preferred share dividends.
(2) Net income before income taxes (teb), non-controlling interest in subsidiary and preferred share dividends.
(3) Return on common shareholders’ equity calculated as net income after preferred share dividends divided by average common shareholders’ equity.
(4) Return on assets calculated as net income after preferred share dividends divided by average total assets.

Minimum Performance Targets and Outlook

CWB exceeded six out of seven of its fiscal 2010 minimum performance targets by considerable margins despite a post-recessionary
economic environment. Total revenue (teb) growth, net income growth, the efficiency ratio (teb) and both profitability ratios were each
well above the respective targets largely reflecting a significant recovery of net interest margin in the wake of the global financial crisis
experienced in 2008 and 2009. Fiscal 2010 performance further benefited from unusually high gains on sale of securities in the first two
quarters and a third quarter recovery of income taxes related to prior period transactions. Loan growth was also well above the target
and included the positive impact from the acquisition of NL, effective February 1, 2010. Growth in total loans excluding NL of 9%
was consistent with lingering recessionary impacts, repayments of existing loans, particularly in the interim construction and equipment
financing portfolios, and continued uncertainty about the strength of economic recovery in North America and globally. The provision
for credit losses was slightly above the upper range of the target reflecting the impact of NL’s comparatively higher provision due to the
nature of its business.

Canada’s economic fundamentals call for moderate growth in 2011. Consistent with a favourable long-term outlook for commodities,
including the impact from developing global economies, management continues to believe Western Canada will perform well
relative to the rest of Canada. The Bank will maintain its focus on high quality, secured loans that offer a fair and profitable return
and management believes there will be good lending opportunities that fit these parameters. The 2011 target for loan growth is 10%,
unchanged from last year. Overall credit quality is within expectations and based on management’s current view, future write-offs
should remain within the Bank’s historical range of acceptable levels. The provision for credit losses is expected to represent 20 to 25
basis points of average loans. Targets for profitability ratios and growth in total revenues and net income are moderated compared
to actual results achieved in 2010 but reflect ongoing confidence in CWB’s business model and overall strategic direction. With its
solid financial footing and strong capital position, CWB is well positioned to take advantage of opportunities and manage unforeseen
challenges that may arise. Management will maintain its focus on creating value and growth for shareholders over the long term. The
overall outlook for 2011 remains positive.

knowing whAt works

CWB Group 2010 Annual Report 33

net interest incoMe
Net interest income is the difference between interest and dividends earned on assets and interest expensed on deposits and other
liabilities, including debentures. Net interest margin is net interest income as a percentage of average total assets.

Highlights of 2010

· Net interest margin (teb) of 2.74% was up significantly from 2.10% in 2009 and 2.30% in 2008 mainly reflecting improved
market conditions and a more favourable interest rate environment following the global financial crisis. The acquisition of
NL further improved net interest margin reflecting comparatively higher yields earned on its lease portfolio.

· Net interest income (teb) was a record $328.7 million, up 39%, reflecting the margin improvement and 7% growth in

average total assets.

Table 3 – neT inTereST income (teb)(1)
($ thousands)

2010

2009

Average

Balance

Mix

Interest

Rate

Average

Balance

Mix

Interest

Rate

Interest

$ 1,767,193

15% $

56,627

3.20% $ 2,007,126

18% $

64,335

3.21%

872

0.53

47,315

Assets
Cash, securities and deposits with
regulated financial institutions

Securities purchased under
resale agreements

Loans

Residential mortgages

Other loans

Total interest bearing assets

Other assets

Total Assets

Liabilities
Deposits

Demand

Notice

Fixed term

Deposit from CWB Capital Trust

Other liabilities

Subordinated debentures

Shareholders’ equity

163,390

2,319,765

7,486,043

9,805,808

11,736,391

270,379

103,371

407,903

511,274

568,773

–

$ 12,006,770

100% $ 568,773

$ 461,662

4% $

–

2,970,970

6,642,576

105,000

10,180,208

430,468

318,729

1,077,365

21,274

194,258

6,745

222,277

17,753

–

4.46

5.45

5.21

4.85

2,211,716

6,794,806

9,006,522

11,060,963

191,783
0.00
4.74% $ 11,252,746

0.00% $
0.72

2.92

6.42

2.18

0.02

5.57

371,288

2,236,527

6,924,320

105,000

9,637,135

512,476

375,000

728,135
0.00
2.00% $ 11,252,746

–

524

1.11

107,896

347,517

455,413

520,272

–

4.88

5.11

5.06

4.70

0.00

100% $ 520,272

4.62%

3% $

–

0.00%

18,873

237,248

6,745

262,866

151

20,901

–

100% $ 283,918

0.84

3.43

6.42

2.73

0.03

5.57

0.00

2.52%

2.10%

Total Liabilities and Equity

$ 12,006,770

100% $ 240,109

Total Assets/Net Interest Income

$ 12,006,770

$ 328,664

2.74% $ 11,252,746

$ 236,354

(1) See page 30 for a discussion of teb and other non-GAAP measures.

Net interest income (teb) of $328.7 million increased 39% ($92.3 million) in the year, driven by the significant improvement in net
interest margin (teb) after the global financial crisis and 6% growth in average interest earning assets. The net interest margin recovery
that began in March 2009 continued through the first two quarters of 2010 and then leveled off. The 64 basis point increase in annual
net interest margin to 2.74% resulted primarily from lower costs on fixed rate term deposits which had increased significantly in 2008
and 2009 relative to benchmark bond rates as a result of the global demand for increased liquidity. Margin also benefited from increased
yields on fixed rate loans primarily related to the National Leasing portfolio, growth in average deposits coming entirely from lower
cost notice and demand deposits, and overall lower liquidity levels, partially offset by lower yields on floating rate loans.

knowing whAt works
CWB Group 2010 Annual Report

Generally, increases in the prime interest rate positively impact net interest margin because prime-based loans reprice more quickly
than deposits, which subsequently expand the interest spread earned on the Bank’s assets. The presence of interest rate floors
negotiated on many lending accounts in 2009 muted the positive impact on net interest margin from recent increases in the prime
lending interest rate as floating loan rates do not increase until the floor has been passed. Management believes future increases in
the prime lending interest rate will have a comparatively more positive impact on net interest margin as many of the floors have
now been passed and/or renegotiated.

The prime rate averaged 2.46% compared to 2.70% last year. The prime rate as at October 31, 2010 was 3.00%, up from its
historic low of 2.25% established in April 2009.

Outlook for Net Interest Income

Fiscal 2011 net interest income should increase with the targeted 10% loan growth and expectations for a slightly improved
net interest margin that is consistent with the full year impact from National Leasing’s higher yielding portfolio, slightly
lower deposit costs and gradual increases in the prime lending interest rate. The foregoing factors support management’s
current expectations that net interest margin (teb) will be slightly above the level achieved in fiscal 2010. Growth in net
interest income due to asset growth and slightly improved margins should more than offset the impact on total revenues (teb)
resulting from an expected decline in the level of gains on sale of securities compared to 2010.

other incoMe

Highlights of 2010

· Other income increased 15% ($14.0 million) reflecting the positive impact of National Leasing and growth in credit related
and net insurance revenues of 35% and 27%, respectively, which more than offset a $12.8 million decrease in gains on sale
of securities.

· Other income represented 24% of total revenues (teb), compared to 28% in 2009, reflecting significant growth in net

interest income due to an improved margin and strong loan growth, as well as a lower level of gains on sale of securities.

Table 4 – oTher income
($ thousands)

Insurance

Net earned premiums

Commissions and processing fees

Net claims and adjustment expenses

Policy acquisition costs

Net insurance revenues

Credit related

Trust and wealth management services

Retail services

Gains on sale of securities, net

Securitization revenue

Foreign exchange
Other(2)

Total Other Income

2010

2009

Change from 2009

111,368

104,062

2,347

(68,641)

(23,358)

21,716

31,550

17,316

9,017

12,447

4,285

2,422

6,842

2,852

(68,996)

(20,802)

17,116

23,369

15,478

7,403

25,225

–

2,745

276

105,595

91,612

7,306

(505)

355

(2,556)

4,600

8,181

1,838

1,614

(12,778)

4,285

(323)

6,566

13,983

(18)

(1)

(51)
nm(1)

(12)

2,379

15%

(1) not meaningful.
(2) Includes fair value changes related to derivative financial instruments not accounted for as hedges, lease administration services, gains/losses on land, buildings and equipment disposals,

and other miscellaneous non-interest revenues.

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CWB Group 2010 Annual Report 35

Other income of $105.6 million was up 15% ($14.0 million) over 2009 and included $11.1 million related to NL’s securitization
and lease administration revenue as well as the change in fair value of interest rate swaps. Strong loan growth, including the
impact of NL, contributed to a 35% ($8.2 million) increase in credit related fees. Net insurance revenues were $4.6 million (27%)
higher on lower claims expense. Although gains on sales of securities were $12.8 million lower compared to the prior year, the
level continued to exceed normal historical amounts and reflected market conditions and investment strategies that allowed the
Bank to capitalize on opportunities to realize gains while maintaining relatively comparable yields on reinvestment in other high
quality investment grade securities.

Fees related to trust and wealth management services increased $1.8 million (12%) reflecting strong performance in each of
CWT, Valiant and Adroit. Transaction related retail service fees increased 22% ($1.6 million) reflecting increased branch activity.

Other income as a percentage of total revenues (net interest income and other income) declined to 24%, compared to 28% in the
prior year. This change was mainly attributed to the significant increase in net interest income due to an improved net interest
margin and loan growth.

Outlook for Other Income

Growth is expected across almost all categories of other income reflecting double-digit loan growth and the Bank’s continued
focus on enhancing transactional services and other sources of fee income. While shifts in the interest rate curve and
market spread fluctuations will likely provide some further opportunities to realize gains on sale of securities, such gains
are not expected to reach the levels realized in fiscal 2009 and 2010 given the return of more typical credit spreads and
the expectation for a more stable interest rate environment. Securitization revenue is expected to reduce as the securitized
portfolios mature and are replaced with on-balance sheet funding sources. The “other” category of other income could also
be lower as 2010 included several unusual items related to both NL’s operations and a tax recovery.

CWB’s medium-term objective is to grow non-interest revenues to comprise 30% of total revenues through ongoing
generation of new business, an enhanced market presence and expanded product offerings. While this objective is supported
by plans for continued expansion of CWB’s branch network, the ongoing development of insurance, trust services, wealth
management and other complementary fee-based businesses will be fundamental to the ultimate achievement of this goal.

The trust companies, including Optimum Mortgage, expect solid growth in 2011 resulting from increased market share and
ongoing business development in both core western markets and select areas in Ontario. Net insurance revenues should
benefit from continued policy growth supported by Canadian Direct’s enhanced distribution capabilities, which include
ongoing development of its Internet channel and an expanded broker network. Management also expects to evaluate
opportunities to expand sources of other income via acquisition.

knowing whAt works
CWB Group 2010 Annual Report

non-interest expenses anD efficiency

Highlights of 2010

· The efficiency ratio (teb) of 44.1% represented a 410 basis point improvement compared to 2009 reflecting the recovery
of net interest margin and strong loan growth which supported a 21% increase in non-interest expenses mainly resulting
from the National Leasing acquisition and ongoing investments to support future growth.

Table 5 – non-inTereST exPenSeS and eFFiciency raTio
($ thousands)

2010

2009

Change from 2009

Salaries and Employee Benefits

Salaries

Employee benefits

Premises
Rent

Depreciation

Other

Equipment and Furniture

Depreciation

Other

General

Marketing and business development

Professional fees and services

Amortization of intangibles

Banking charges

Postage and stationery

Capital and business taxes

Regulatory costs

Travel

General insurance

Community investment

Communications

Other

Total Non-Interest Expenses

Efficiency Ratio (teb)(1)(2)

103,273

87,381

20,699

123,972

13,564

3,697

2,208

19,469

6,335

5,644

11,979

5,220

5,122

4,068

2,907

2,458

1,979

1,916

1,636

1,280

1,158

998

7,318

16,724

104,105

12,431

2,869

1,997

17,297

4,634

4,099

8,733

4,336

4,007

1,256

2,224

2,486

2,230

1,466

1,360

1,066

690

1,155

5,771

36,060

28,047

15,892

3,975

19,867

18%

1,133

828

211

2,172

1,701

1,545

3,246

884

1,115

2,812

683

(28)

(251)

450

276

214

468

(157)

1,547

8,013

224

(1)

(11)

(14)

191,480

158,182

33,298

21%

44.1%

48.2%

(410)bp(3)

(1) Non-interest expenses as a percentage of total revenues (net interest income (teb) plus other income). See page 30 for a discussion of non-GAAP measures.
(2) A decrease in this ratio reflects improved efficiency, while an increase reflects deterioration.
(3) bp – basis points.

knowing whAt works

CWB Group 2010 Annual Report 37

Total non-interest expenses of $191.5 million increased 21% ($33.3 million) with the February 1, 2010 acquisition of National
Leasing contributing $20.1 million of the increase. Excluding National Leasing, non-interest expenses increased $13.2 million
(8%). Salaries and benefits increased 19% (8% excluding National Leasing) largely reflecting increased staff complement, annual
salary increments and lower stock-based compensation charges. Fiscal 2009 included $1.7 million of additional non-cash, stock-
based compensation expense reflecting required accounting treatment for stock options voluntarily forfeited by certain CWB
management. The number of full-time equivalent employees (FTEs) grew 29% (391 FTEs) from October 31, 2009 with the
increase reflecting the impact of National Leasing (257 FTEs), staffing requirements for additional bank branches and other
business expansion. Premises and equipment expenses, including depreciation, increased 21% ($5.4 million) with one-third of the
growth relating to National Leasing and the remainder due to premises and technology infrastructure investment such as a new
integrated general ledger and budget system. General non-interest expenses increased 29% (16% excluding National Leasing)
reflecting costs to manage the ongoing growth and development of CWB’s businesses. The increase in amortization of intangibles
of $2.8 million relates to the acquisition of NL.

Growth in total revenues (teb) mainly due to an improved net interest margin and loan growth, including the impact of National
Leasing, surpassed growth in non-interest expenses, leading to an efficiency ratio (teb) of 44.1%, a 410 basis point improvement
compared to the prior year. Non-interest expenses as a percentage of average assets of 1.6% compares to 1.4% in 2009.

Outlook for Non-Interest Expenses and Efficiency

Expected growth in total revenues (teb) in 2011 should largely offset the impact of increased non-interest expenses
necessary for effective execution of CWB’s strategic plan focused on sustainable growth. Expenses related to additional staff
complement, expanded premises, technology upgrades and process improvements are an integral part of management’s
commitment to effectively support growth and maximize shareholder value over the long term. Further building on CWB’s
position as an employer of choice is a priority. In the fourth quarter of 2010, new full-service branches were opened in
Sherwood Park, Alberta and Surrey, BC. Management expects there will be further development of the branch network in
2011. Investments in technology, such as those being made for the introduction of a new loan origination system, systems
infrastructure and business applications will also contribute to the level of non-interest expenses in 2011, but are expected to
provide significant operating efficiencies in future periods. Announced reductions in capital tax rates, as well as expectations
for modest inflationary pressures in 2011 will moderate non-interest expenses. Overall, CWB expects to achieve an
efficiency ratio (teb) of 46% or better in fiscal 2011.

incoMe anD capital taxes
The provision for income taxes (teb) was 26.3% down from 31.8% in the prior year. 2010 tax expense included a $7.5 million
tax recovery related to the resolution of items pertaining to prior years which reduced the tax provision by 360 basis points. The
provision before the teb adjustment was 22.4%, compared to 28.2% in the previous year. The federal corporate income tax rate
was reduced from 19.5% to 19.0%, effective January 1, 2009 and to 18.0% effective January 1, 2010. Effective July 1, 2009, the
corporate provincial income tax rate in Manitoba decreased 100 basis points to 12%, while the rate in British Columbia decreased
50 basis points to 10.5% on January 1, 2010. On April 1, 2009, the capital tax rate in BC applicable to CWB decreased to 0.33%,
down from 0.67%, and was eliminated completely on April 1, 2010.

Future tax assets and liabilities represent the cumulative amount of tax applicable to temporary differences between the carrying
amount of the assets and liabilities and their values for tax purposes. The future income tax asset and liability relate primarily to the
general allowance for credit losses and intangible assets, repectively. Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. Changes in future income taxes related to a change in tax rates are recognized in income in the period
of the tax rate change.

Capital losses of $11.1 million (2009 – $11.1 million) are available to apply against future capital gains and have no expiry date.
The tax benefit of these capital losses has not been recognized.

knowing whAt works
CWB Group 2010 Annual Report

Table 6 – caPiTal TaxeS
($ thousands)

British Columbia

Alberta

Saskatchewan

Manitoba

Total Capital Taxes

Capital

Tax Rate

Capital

Allocation

0.14%(1)

n/a

0.7%

3.0%

28%

65%

Change from 2009

2010

738

n/a

404

407

2009

1,149

n/a

375

408

(411)

–

(1)

1,549

1,932

(383)

(36)%

–

(0)

(20)%

(1) The BC capital tax rate decreased from 0.33% to nil effective April 1, 2010. The above table reflects the blended rate for 2010.

Capital taxes for 2010 totaled $1.5 million, representing a 20% decline from 2009. Lower capital taxes reflect the elimination of
capital tax on financial institutions in BC, partially offset by increased capital associated with the retention of earnings.

Outlook

Based on current expectations, CWB’s budgeted income tax rate (teb) for fiscal 2011 is 28.5%, or 24.5% before the teb
adjustment, reflecting announced reductions in the federal (150 basis points) and BC (50 basis points) corporate income tax
rates effective January 1, 2011. Provincially levied capital taxes will decline with the elimination noted above, partially offset
by the ongoing retention of earnings and the impact of new capital issues, if these are material.

coMprehensive incoMe
Comprehensive income is comprised of net income and other comprehensive income (OCI) all net of income taxes. CWB’s OCI includes
unrealized gains and losses on available-for-sale cash and securities, and fair value changes for derivative instruments designated as cash flow hedges.

Comprehensive income totaled $167.4 million for the year, compared to $130.6 million last year. As previously noted, net income was
up 54% ($57.3 million) compared to one year ago. Lower OCI in 2010 reflects a much smaller increase in the fair value of available-for-
sale cash and securities compared to 2009 and a lower volume of gains reclassified to other income on the sale of securities.

Table 7 – comPrehenSive income
($ thousands)

Net Income

Other Comprehensive Income
Available-for-sale securities

Gains from change in fair value, net of tax

Reclassification to other income, net of tax

Derivatives designated as cash flow hedges

Gains from change in fair value, net of tax

Reclassification to net interest income, net of tax

Reclassification to other liabilities for derivatives terminated prior to maturity, net of tax

Total Comprehensive Income

2010
163,621 $

2009

106,285

14,285

(8,868)

5,417

(1,613)

–

(1,596)

3,821
167,442 $

47,214

(17,556)

29,658

9,453

(9,379)

(5,410)

(5,336)

24,322

130,607

knowing whAt works

CWB Group 2010 Annual Report 39

cash anD securities
Cash, securities and securities purchased under resale agreements totaled $1,876 million at October 31, 2010, compared to $2,189
million one year ago. The unrealized gain recorded on the balance sheet at October 31, 2010 was $32.1 million, compared to $24.8
million last year. The change in unrealized gains is primarily attributed to a market value improvement in the preferred share portfolio;
unrealized gains in this portfolio totaled $18.3 million, compared to $5.8 million a year earlier. The cash and securities portfolio is
mainly comprised of high quality debt instruments and a much smaller component of preferred and common equities, primarily those
of the major Canadian banks, which are not held for trading purposes and, where applicable, are typically held until maturity. While
the combined value of investments in preferred and common equities is relatively small in relation to total liquid assets, it does increase
the potential for comparatively larger fluctuations in OCI. Fluctuations in fair value of the securities portfolios are generally attributed
to changes in interest rates, market credit spreads and shifts in the interest rate curve. During 2010, the Bank increased the amount
invested in common shares of Canadian large market capitalization firms. This portfolio remains relatively small and is managed with
a mandate to achieve reasonable long-term capital appreciation with a preference toward dividend income.

The Bank was able to capitalize on opportunities to realize gains on sale of securities in the past two years resulting from a combination
of investment strategies and market conditions. Realized gains on sale of securities in 2010 were $12.4 million, a $12.8 million decrease
compared to the prior year but well above the five-year average of $8.6 million. The level of gains on sale of securities is expected to decrease
in future periods. The Bank has no direct exposure to any troubled asset backed commercial paper, collateralized debt obligations, credit
default swaps, U.S. subprime lending or monoline insurers. CWB also has no direct credit exposure to sovereign debt outside of Canada.

See Table 27 – Valuation of Financial Instruments on page 64 of this MD&A for additional information.

Cash and securities are managed in conjunction with CWB’s overall liquidity and additional information is included in the
Liquidity Management discussion beginning on page 48 of this MD&A.

loans

Highlights of 2010

· Returned to double-digit loan growth, an achievement realized in 20 of the past 21 years (the exception being 2009 when

loan growth was 7%).

· Total loan growth of 14%, led by 37% growth in equipment financing (including National Leasing), 20% growth in

commercial mortgages and 24% growth in personal loans and mortgages (including Optimum Mortgage).

· A 13% decline in real estate project loans reflecting both expected loan repayments due to this portfolio’s relatively short
duration and a continued reduction in lending opportunities reflective of a moderated economic environment and reduced
residential sales activity.

Table 8 – ouTSTanding loanS by PorTFolio
($ millions)

Commercial mortgages

General commercial loans

Real estate project loans

Personal loans and mortgages

Equipment financing

Corporate loans

Oil and gas production loans

Total Outstanding Loans

Change from 2009

2010
2,458 $
2,197

1,576

1,794

1,624

660

266
10,575 $

2009

2,051 $

1,992

1,803

1,451

1,186

672

157

407

205

(227)

343

438

(12)

109

9,312 $

1,263

20%

(13)

(2)

14%

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CWB Group 2010 Annual Report

Total loans, excluding the allowance for credit losses, increased 14% ($1,263 million) to reach $10,575 million at year end.
Measured by loan type as shown in Table 8, National Leasing’s on-balance sheet portfolio at year end of $482 million represented
the strongest source of loan growth in 2010, in both dollar and percentage terms, and is represented in equipment financing. The
equipment financing portfolio excluding National Leasing was down $36 million from the prior year reflecting the combined
impact of this portfolio’s relatively short duration and continued economic uncertainty. Commercial mortgages grew 20% ($407
million) over 2009. Personal loans and mortgages, which include the Bank’s alternative residential mortgage business, Optimum
Mortgage (Optimum), showed very strong results with 24% ($343 million) growth. General commercial loans grew 10% ($205
million) over 2009 and include categories based on industry sector (see Table 12 on page 46) such as manufacturing, finance and
insurance, wholesale and retail trade, and others. Corporate loans represent a diversified portfolio that is centrally sourced and
administered through a designated lending group located in Edmonton. These loans include participation in select syndications
structured and led primarily by the major Canadian banks, but exclude participation in various other syndicated facilities sourced
through relationships developed at CWB branches. Syndicated facilities that are sourced in branches are primarily real estate
project loans and oil and gas production loans and are included under the appropriate classifications in Table 8. The only
significant year-over-year decline by loan type was in real estate project loans reflecting both significant loan repayments due to
this portfolio’s relatively short duration and reduced new lending opportunities in this area. Oil and gas production loans, although
still a small percentage of the portfolio, increased significantly.

Loans in Optimum, the Bank’s alternative mortgage business, increased 42% over October 31, 2009 to reach $796 million.
Residential sales activity was much stronger in the first half of calender 2010 prompted by changes to residential mortgage
regulations and the implementation of Harmonized Sales Tax in Ontario and BC. During the year, Optimum continued to increase
the proportion of the portfolio represented by higher ratio mortgages insured by either the Canada Mortgage and Housing
Corporation (CMHC) or Genworth Financial Canada. Management expects insured mortgages will become a larger component
of this portfolio going forward. Optimum continued to underwrite residential mortgages in certain targeted regions of Ontario
in an effort to further grow and diversify the portfolio. The uninsured mortgages carry a weighted average loan-to-value ratio
at origination of approximately 70%. The vast majority of all Optimum mortgages carry a fixed interest rate with the principal
amortized over 25 years or less. Management remains committed to further developing the alternative mortgage business as it
continues to produce strong returns while maintaining an acceptable risk profile. Optimum’s portfolio of insured mortgages is also
expected to provide a source of future growth.

The mix of the portfolio shifted slightly during the year (see Figure 1 below) as growth in equipment financing related to NL’s
portfolio offset the decrease in real estate project loans. Based on the location of security, Alberta and BC represented 48% and
33% of total loans at year end, respectively. The geographic distribution of loans (see Figure 3 on page 45) shifted slightly from
Alberta and BC to “other” provinces reflecting the broader geographic footprint of NL’s portfolio.

Figure 1 – ouTSTanding loanS by PorTFolio
(October 31, 2009 in brackets)

Personal Loans
& Mortgages
17%(16%)

General
Commercial
21%(21%)

Corporate
Loans
6% (7%)

Oil & Gas
Production
3% (2%)

Equipment
Financing
15%(13%)

Commercial
Mortgages
23%(22%)

Real Estate
Project Loans
15%(19%)

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CWB Group 2010 Annual Report 41

Outlook for Loans

The Bank expects to maintain double-digit loan growth and has set its fiscal 2011 minimum loan growth target at 10%. This
reflects the belief that CWB will continue to gain market share due to a combination of its expanded market presence, the
implementation of enhanced loan origination and brand awareness strategies, and fewer active foreign-based competitors in
some lending areas. Canada’s domestic economy continues to demonstrate moderate growth led by strength in commodities
which should positively impact growth in the four western provinces. Management believes Western Canada will be
poised for comparatively faster economic growth than the rest of Canada. In Alberta, the forecast for 2011 is supported by
returning strength in oil and gas production. The ongoing development of the Canadian oilsands is particularly important
as it continues to deliver higher production levels and results in significant capital investment in the province. For BC, near-
term growth expectations will be mainly driven by public infrastructure spending. The resource sector in BC is showing
modest improvement and this positive momentum is expected to continue. Growth in Saskatchewan will be supported by the
recovery in potash production, the potential for year-over-year improvement in agriculture output and the region’s growing
energy sector. Manitoba’s economy is diverse with positive economic growth contributions mainly expected from agriculture
production, mining, and oil and gas. Materially higher prices for natural gas are unlikely in the foreseeable future and will
continue to adversely affect exploration and production companies that rely on this area, as well as related drilling activity
and supporting service companies. Improving employment, real income growth, the current low interest rate environment
and continued migration toward Western Canada will positively contribute to housing affordability and help maintain an
adequate balance between supply and demand for residential real estate. Paybacks on existing real estate project loans will
likely moderate the overall level of loan growth and this circumstance is expected to continue until there is increased certainty
regarding the strength of economic recovery. While strong competition from domestic banks and other financial services firms
is expected to persist, the current overall outlook for new loans is encouraging.

creDit Quality

Highlights of 2010

· Credit quality and risk performance remained satisfactory and within expectations given post-recessionary impacts.

· The provision for credit losses was $20.4 million and represented 21 basis points of average loans, one basis point above the upper

end of the fiscal 2010 target range reflecting the acquisition of NL.

· The dollar level of gross impaired loans increased slightly, but decreased when measured as a percentage of the total portfolio; gross
impaired loans represented 135 basis points of total loans at October 31, 2010, compared to 149 basis points at the end of fiscal 2009.

Impaired Loans

As shown in Table 9, gross impaired loans totaled $143.2 million and represented 1.35% of outstanding loans, compared to
1.49% of total loans last year. While there are positive signs, the current credit cycle continues to run its course and management
expects the dollar level of gross impaired loans will fluctuate until economic conditions stabilize further. Fluctuations in the level of
impaired loans are expected as loans become impaired and are subsequently resolved. The dollar level of gross impaired loans does
not directly reflect the dollar value of expected write-offs given the tangible security held against the Bank’s lending positions. The
global economic downturn impacted virtually all industries represented in the Bank’s loan portfolio with the largest impact being
on the construction and real estate industry sectors, as well as the heavy equipment financing sector.

knowing whAt works
CWB Group 2010 Annual Report

Table 9 – change in groSS imPaired loanS
($ thousands)

Change from 2009

Gross impaired loans, beginning of period

New formations

Reductions – impaired accounts paid down

or returned to performing status

Write-offs

Total, end of period(3)

Balance of the ten largest impaired accounts

Total number of accounts classified as impaired(4)

Total number of accounts classified as impaired

under $1 million

Gross impaired loans as a percentage of total loans(1)

2010

137,944

165,833

2009

2008

91,636

21,104

158,129

99,078

(135,971)

(24,599)

143,207

79,721

189

163

1.35%

(97,979)

(13,842)

(25,968)

(2,578)

137,944

91,636

76,101

56,797

224

199

1.49%

161

142

1.05%

46,308

7,704

(37,992)

(10,757)

5,263

3,620

(35)

(36)

–

(16)

(18)

(14)bp(2)

(1) Total loans do not include an allocation for credit losses or deferred revenue and premiums.
(2) bp – basis point.
(3) Gross impaired loans includes foreclosed assets held for sale with a carrying value of $867 (2009 – nil).
(4) Total number of accounts excludes National Leasing accounts.

Although the level of gross impaired loans increased compared to prior years, the ongoing resolution of impaired accounts with
relatively low loss experience demonstrates the benefits of CWB’s secured lending practices, as well as the ongoing success of loan
realization efforts and work out programs. The current estimates of expected write-offs for existing loans classified as impaired are
reflected in the specific provisions for credit losses. The Bank establishes its current estimates of expected write-offs through detailed
analyses of both the overall quality and ultimate marketability of the security held against impaired accounts. The ten largest accounts
classified as impaired measured by dollars outstanding represented approximately 56% of the total gross impaired loans at year end,
compared to 55% a year earlier. While new formations of impaired loans exceeded reductions in the year by $29.9 million, there was a
net reduction of $14.6 million through the latter half of the 2010 fiscal year.

The 2010 provision for credit losses of $20.4 million increased $6.9 million over the previous year and represented 21 basis points of
average loans, compared to 15 basis points in 2009. The increase in the provision measured against average loans was mainly attributed
to the acquisition of NL. Compared to the Bank’s traditional lending portfolio, the nature of NL’s business leads to a higher provision
for credit losses that is more than offset by a comparatively higher portfolio yield. At October 31, 2010, gross impaired loans exceeded
the total allowance for credit losses by $64.6 million, representing 62 basis points (2009 – 68 basis points) of net loans outstanding (see
Figure 2). In the five years prior to fiscal 2008, a relatively consistent dollar provision for credit losses together with an exceptionally
low level of impaired loans had resulted in the total allowance for credit losses exceeding gross impaired loans, which is also reflected
in Figure 2. The general allowance represented 57 basis points of risk-weighted assets at year end (2009 – 65 basis points). Continued
fluctuations are expected as the economic cycle runs its course and specific weaknesses in the portfolio become evident. The allowance
for credit losses as a percentage of gross impaired loans (coverage ratio) remained unchanged from 2009 at 55%.

Figure 2 – neT imPaired loanS aS a PercenTage oF neT loanS ouTSTanding

(0.57%)

(0.75%)

(0.68%)

(0.36%)

0.62%

0.68%

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0.19%

0.13%

0.25%

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CWB Group 2010 Annual Report 43

The overall loan portfolio is reviewed regularly with credit decisions undertaken on a case-by-case basis to provide early identification
of possible adverse trends. Loans that have become impaired are monitored closely with regular quarterly, or more frequent,
reviews of each loan and its realization plan.

Outlook for Impaired Loans

Overall credit quality is expected to remain satisfactory and actual losses should be within CWB’s range of acceptable levels.
The level of gross impaired loans will continue to fluctuate up and down from current levels until realization objectives
are attained and the credit cycle runs its course. Gross impaired loans will return to more normal levels over time as the
economic recovery is confirmed. Overall lending exposures will continue to be closely monitored and management remains
confident in the strength, diversity and the underwriting structure of the loan portfolio.

Allowance for Credit Losses

Table 10 shows the year-over-year change in the allocation of the allowance for credit losses to specific provisions by category of
impaired loans and to the general allowance for credit risk.

Table 10 – allowance For crediT loSSeS
($ thousands)

Specific Allowance

Commercial

Real estate

Equipment financing

Consumer and personal

General Allowance

Total

(1) Recoveries in 2010 totaled $600 (2009 – $263).

2010

Opening

Balance

Provision

Write-Offs,

for Credit

Acquisition of

net of

Losses

Subsidiary

Recoveries(1)

1,292 $

10,652 $

5,611

6,196

1,207

14,306

61,153

3,232

10,309

1,942

26,135

(5,722)

– $

–

2,596

–

2,596

4,172

(9,289)

(3,963)

(8,886)

(1,861)

(23,999)

–

75,459 $

20,413 $

6,768 $

(23,999)

2010

Ending

Balance

2,655

4,880

10,215

1,288

19,038

59,603

78,641

The allowance for credit losses is maintained to absorb both identified and unidentified losses in the loan portfolio and, at
October 31, 2010, consisted of $19.0 million in specific allowances and $59.6 million in the general allowance for credit losses.
Specific allowances include the accumulated allowances for losses required on identified impaired accounts to reduce the carrying
value of those loans to their estimated realizable amount. The general allowance for credit risk includes allowances for losses
inherent in the portfolio that are not presently identifiable on an account-by-account basis. The general allowance represented 56
basis points of gross outstanding loans (2009 – 66 basis points) and 57 basis points of risk-weighted assets (2009 – 65 basis points).
An assessment of the adequacy of the general allowance is conducted quarterly and measured against the three-, five- and 10-year
loan loss averages. In addition, a method of applying a progressive (increasing with higher risk) loss ratio range against groups of
loans of a common risk rating is utilized to test the adequacy of the general allowance. Over the previous four years, the general
allowance increased reflecting portfolio growth and a strong economy. In the current year, challenging economic conditions
contributed to a decrease in the general allowance as impaired accounts were identified and a portion of the allowance was allocated
to specific credits.

Policies and methodology governing the management of the general allowance are in place. The loan portfolio is delineated
through the assignment of internal risk ratings to each borrower. The rating is based on assessments of key evaluation factors for
the nature of the exposure applied on a consistent basis across the portfolio. The rating system has 12 levels of risk and ratings are
updated at least annually for all loans, with the exception of consumer loans and single-unit residential mortgages. Development
of additional methodology to support the testing of the adequacy of the general allowance continues. At October 31, 2010, the
general allowance for credit losses met all of management’s tests of adequacy.

knowing whAt works
CWB Group 2010 Annual Report

Outlook for Allowance for Credit Losses

Specific allowances will continue to be determined on an account-by-account basis and reviewed at least quarterly. The general
allowance is expected to fluctuate to account for portfolio growth, lower levels of specific allowances in strong economic times
and higher levels of specific allowances in weaker economic times, such as the current period. Based on management’s current
outlook for credit performance, actual historical loss experience and results from stress testing of the portfolio, the existing level
of the general allowance is deemed sufficient to mitigate losses inherent in the portfolio that are not presently identifiable.

Provision for Credit Losses

The provision for credit losses represented 21 basis points of average loans in 2010 (see Table 11), an increase from the three-
year average of 17 basis points and unchanged from the five-year average of 21 basis points. The increase in the provision as a
percentage of average loans in 2010 reflects the characteristics of NL’s portfolio. The net new specific provision represented 27
basis points of average loans in 2010. These results compare to the three-, five-and ten-year trends when the net new specific
provision for credit losses averaged 15, 9 and 13 basis points of average loans, respectively. During 2010, $5.7 million was drawn
from the general allowance for credit losses and applied to net new specific provisions reflecting the Bank’s current position in the
latter stages of the credit cycle. The Bank has a long history of strong credit quality and low loan losses, both of which compare
very favourably to the Canadian banking industry. External factors that may impact Western Canada and the sectors in which the
Bank’s customers operate are continually analyzed.

Table 11 – ProviSion For crediT loSSeS
($ thousands)

Provision for credit losses(1)

Net new specific provisions (net of recoveries)(2)

General allowance

Coverage ratio(3)

2010

0.21%

0.27

2009

0.15%

0.14

2008

0.15%

0.09

2007

0.16%

0.04

59,603

61,153

60,527

55,608

55%

82%

299%

2006

0.20%

(0.03)

48,037

514%

(1) As a percentage of average loans.
(2) Portion of the year’s provision for credit losses allocated to specific provisions as a percentage of average loans.
(3) Allowance for credit losses as a percentage of gross impaired loans.

Outlook for the Provision for Credit Losses

The provision for credit losses in 2011 is expected to be 20 to 25 basis points of average loans, consistent with results in
2010. The expected provision reflects the Bank’s current assessment based on reasonable assumptions about the economic
outlook, expected 10% loan growth, the overall quality of the portfolio and its underlying security, as well as the adequacy of
the general allowance for credit losses. This assessment is ongoing and the Bank’s updated expectations are communicated no
less than quarterly.

Diversification of Portfolio

Total Advances Based on Location of Security

Figure 3 – geograPhical diSTribuTion oF loanS(1)
(October 31, 2009 in brackets)

British
Columbia
33% (35%)

Alberta
48% (50%)

Other
10% (7%)

Manitoba
3% (3%)

Saskatchewan
6% (5%)

(1) Includes letters of credit.

knowing whAt works

CWB Group 2010 Annual Report 45

The following table illustrates the diversification in lending operations by standard industry sectors.

Table 12 – ToTal advanceS baSed on induSTry SecTor(1)
(% at October 31)

Real estate operations

Construction

Consumer loans and residential mortgages(2)

Health and social services

Transportation and storage

Hotel/motel

Finance and insurance

Oil and gas (production)

Manufacturing

Retail trade

Oil and gas (service)

Wholesale trade

Other services

Logging/forestry

All other

Total

2010

22%

2009

22%

100%

(1) 2010 percentages are based on the North American Industry Classification System (NAICS) and 2009 percentages are based on the Standard Industrial Classification (SIC) codes.
(2) Residential mortgages in this table include only single-family properties.

The loan portfolio is focused on areas of demonstrated lending expertise, while concentrations measured by geographic area
and industry sector are managed within specified tolerance levels. The portfolio is well diversified with a mix of commercial and
personal business. Heavy equipment financing is primarily sourced within branches or through stand-alone equipment financing
centres, while small- and mid-sized leases are offered across Canada through NL. Oil and gas production lending is conducted by
specialists located in Calgary. Real estate specialists are established in the major centres of Edmonton, Calgary and Vancouver.
The alternative residential mortgage business, Optimum, maintains centralized administration based in Edmonton.

Outlook for Diversification of Portfolio

Portfolio diversification by geography is expected to remain relatively consistent with October 31, 2010. Interim construction
accounts (i.e. real estate project loans) are expected to reduce as a proportion of total loans in 2011 reflecting a combination
of loan repayments due to this portfolio’s relatively short duration and moderated lending opportunities compared to other
lending areas. There is increased optimism about lending opportunities in heavy equipment financing moving forward,
particularly as economic factors improve further. An enhanced emphasis on generating residential mortgages, mainly through
Optimum Mortgage, should result in a further increase in the proportion of consumer loans and residential mortgages in
fiscal 2011. NL maintains lending operations across Canada with the largest concentration by province in Ontario. A strong
outlook for this business is expected to provide further diversification by both industry and geography. The Bank also expects
its oil and gas production loans could increase as a percentage of the portfolio in 2011.

Deposits

Highlights of 2010

· Personal deposits, which include the Bank’s lowest cost source of funding, increased 14%.

· Business and government deposits increased 9%.

· Branch and trust generated demand and notice deposits increased 8%.

· Branch and trust generated deposits were 61% of total deposits, down from 64% a year earlier reflecting growth in fixed

rate term deposits raised through the deposit broker network primarily to meet funding requirements for NL.

knowing whAt works
CWB Group 2010 Annual Report

Table 13 – dePoSiTS
($ thousands)

Personal

Business and government

Deposit-taking institutions

Deposit from CWB Capital Trust(1)

Total Deposits

% of Total

Personal

Business and government

Deposit-taking institutions

Deposit from CWB Capital Trust(1)

Total Deposits

% of Total

Demand

Notice

Term

2010

Total

23,308

1,840,026

5,462,231

7,325,565

507,300

1,159,573

1,713,329

3,380,202

–

2,000

105,000

2,000

105,000

530,608

2,999,599

7,282,560

$ 10,812,767

28%

67%

100%

Demand

Notice

Term

2009

Total

20,028

1,660,715

4,717,146

6,397,889

339,148

1,117,886

1,655,315

3,112,349

–

2,000

105,000

2,000

105,000

% of

Total

68%

–

100%

% of

Total

–

359,176

2,778,601

6,479,461

9,617,238

100%

29%

67%

100%

(1) The senior deposit note of $105 million issued to Canadian Western Bank Capital Trust (CWB Capital Trust) is reflected as a deposit payable on a fixed date. This senior deposit note bears
interest at an annual rate of 6.199% until December 31, 2016 and, thereafter, at the CDOR 180-day Bankers’ Acceptance Rate plus 2.55%. This note is redeemable at the Bank’s option, in
whole or in part, on and after December 31, 2011, or earlier in certain specified circumstances, both subject to the approval of OSFI. Each one thousand dollars of WesTS note principal is
convertible at any time into 40 non-cumulative redeemable CWB First Preferred Shares Series 1 of the Bank at the option of CWB Capital Trust. CWB Capital Trust will exercise this conversion
right in circumstances in which holders of WesTS exercise their holder exchange rights. See Note 15 to the consolidated financial statements for more information on WesTS and CWB
Capital Trust.

Total deposits at year end of $10,813 million increased 12% ($1,196 million) over 2009 reflecting 14% ($928 million) growth
in personal deposits and 9% ($268 million) growth in business and government deposits. Reflecting the Bank’s commercial focus,
a considerable portion of branch deposits are generated from corporate clients that tend to hold larger balances compared to
personal retail clients (See the Liquidity Management section on page 48 of this MD&A).

Table 14 – dePoSiTS by Source
(as a percentage of total deposits at October 31)

Branches

Deposit brokers

Corporate wholesale

Deposit from CWB Capital Trust

Total

2010

61%

–

100%

2009

64%

100%

2008

63%

100%

2007

64%

100%

2006

66%

100%

Deposits are primarily generated from the branch network (including CWT) and a deposit broker network. Increasing the level
of retail deposits is an ongoing focus as success in this area provides the most reliable and stable source of funding. CWB’s high-
interest Summit Savings Account® continues to be well received, with the total dollar value of deposits from this source growing
$79 million in the year to reach $650 million. An Internet-based division of the Bank named Canadian Direct Financial® offers
deposit and registered savings products primarily to customers who do not have convenient access to CWB’s branch network.
Canadian Direct Financial® has shown good results to date and management is optimistic about its potential to provide a more
valued source of funding in the future. CWT raises deposits through notice accounts (comprised primarily of cash balances held
in self-directed registered accounts), corporate trust deposits and the Bank’s branch network, in addition to deposits generated
through the deposit broker network. Insured deposits raised through deposit brokers also remain a valued funding source.
Although these funds are subject to commissions, this cost is countered by a reduced dependence on a more extensive branch
network and the benefit of generating insured fixed term retail deposits over a wide geographic base. Corporate wholesale
deposits represent larger deposits raised through CWB’s corporate office rather than the branch network. Growth in total branch
and trust-raised deposits was 8% this year. The demand and notice component within branch-raised deposits increased 12% to
comprise 33% of total deposits at year end, unchanged from the previous year. At October 31, 2010, branch and trust generated
deposits comprised 61% of total deposits, compared to 64% in the previous year with the decrease reflecting fixed rate term
deposits raised through the deposit broker network largely due to the funding requirements of NL, partially offset by the above-

knowing whAt works

CWB Group 2010 Annual Report 47

noted growth in branch-raised deposits. Growth in demand and notice deposits reflects ongoing execution of strategies to further
enhance and diversify the Bank’s core funding sources as well as CWT’s success in generating deposits through its fiduciary
trust business.

Outlook for Deposits

A strategic focus on increasing branch-raised deposits (including CWT) will continue in 2011, with emphasis on the demand and
notice component, which is often lower cost and provides associated transactional fee income. CWB’s expanded market presence
also supports objectives to generate branch-raised deposits. Further diversifying the deposit base via new and/or enhanced
product offerings and through Canadian Direct Financial® are ongoing initiatives. Valiant Trust Company has been approved as
a federal deposit-taking institution and management plans to further develop strategies to utilize this additional channel to raise
insured deposits. The Bank’s deposit broker network remains a valued source for raising insured fixed term retail deposits and
has proven to be an extremely effective and efficient way to access funding and liquidity over a wide geographic base. The deposit
broker network is also a very effective channel to raise deposits to meet the fixed term funding requirements of NL.

other assets anD other liabilities
At October 31, 2010 other assets totaled $329 million (2009 – $211 million). The increase from 2009 primarily reflects goodwill
and intangibles related to the acquisition of NL. The increase also included a $30 million amount receivable related to redemptions
of securities that were not settled until the first business day in November. Insurance related other assets were $60 million
(2009 – $56 million) and consisted primarily of instalment premiums receivable as well as the reinsurer’s share of unpaid claims.
Other assets at October 31, 2010 included goodwill and intangible assets of $38 million and $43 million, respectively.

Other liabilities totaled $426 million at October 31, 2010 (2009 – $657 million) and included nil (2009 – $300 million) securities
purchased under reverse resale agreements. Reverse resale agreements are periodically used for short-term cash management
purposes. Insurance related other liabilities were $149 million (2009 – $146 million) and consisted primarily of provisions for
unpaid claims and adjustment expenses and unearned premiums. Other liabilities at October 31, 2010 also include a $31 million
provision for contingent consideration and $53 million of other liabilities related to the NL acquisition.

liQuiDity ManageMent

Highlights of 2010

· Maintained a strong liquidity position and conservative investment profile.

· Enhanced liquidity monitoring capabilities and increased stability in Canadian capital markets allowed for a reduction in

liquid assets to more normal levels.

· In November 2010, subsequent to year end, received a credit rating from DBRS Limited on senior debt/deposits (A low)

and subordinated debentures (BBB high); both ratings were issued indicating a stable trend.

A schedule outlining the consolidated securities portfolio at October 31, 2010 is provided in Note 4 to the consolidated financial
statements. A conservative investment profile is maintained by ensuring:

· all investments are high quality and include government debt securities, short-term money market instruments, preferred shares

and other marketable securities;

· specific investment criteria and procedures are in place to manage the securities portfolio;

· regular review, monitoring and approval of investment policies by management’s Asset Liability Committee (ALCO); and,

· quarterly reporting to the Board of Directors on the composition of the securities portfolio supported by an annual review and

approval by the Board of Directors.

The Bank has no direct exposure to any troubled non-bank sponsored asset-backed commercial paper, collateralized debt
obligations, credit default swaps, U.S. subprime mortgages or monoline insurers. CWB also has no direct credit exposure to
sovereign debt outside of Canada.

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CWB Group 2010 Annual Report

The Bank’s liquidity management is a comprehensive process that includes, but is not limited to:

· monitoring of liquidity reserve levels;

· operating micro and macro scenario stress testing;

· maintenance of a short duration liquidity portfolio;

· monitoring the credit profile of the liquidity portfolio;

· monitoring deposit behaviour; and

· ongoing market surveillance.

Table 15 – liquid aSSeTS
($ thousands)

Cash

Deposits with regulated financial institutions

Cheques and other items in transit

Total Cash Resources

Securities purchased under resale agreements

Government of Canada treasury bills

Government of Canada, provincial and municipal bonds, term to maturity 1 year or less

Government of Canada, provincial and municipal bonds, term to maturity more than 1 year

Preferred shares

Other marketable securities

2010

4,244

173,719

9,981

187,944

177,954

434,383

128,799

89,990

511,228

345,787

Total Securities Purchased or Sold Under Resale Agreements and Marketable Securities

1,688,141

2009

4,069

280,358

12,677

297,104

(300,242)

156,677

130,510

820,413

434,361

349,448

1,591,167

Change

from

2009

175

(106,639)

(2,696)

(109,160)

478,196

277,706

(1,711)

(730,423)

76,867

(3,661)

96,974

(12,186)

1,065,819

Total Liquid Assets

Total Assets

Liquid Assets as a Percentage of Total Assets

Total Deposit Liabilities

Liquid Assets as a Percentage of Total Deposit Liabilities

1,876,085

1,888,271

$ 12,701,691

$ 11,635,872

15%

16%

(1)%

$ 10,812,767

9,617,238

1,195,529

17%

20%

(3)%

As shown in Table 15, liquid assets comprised of cash, interbank deposits, securities purchased under resale agreements and
marketable securities totaled $1,876 million at October 31, 2010, a decrease of $13 million compared to a year earlier. The Bank
continues to carry more liquidity than it would in a robust economic environment with more normal market conditions. Liquid
assets represented 15% (2009 –16%) of total assets and 17% (2009 – 20%) of total deposit liabilities at year end.

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CWB Group 2010 Annual Report 49

Over the year, the Bank shifted a significant portion of government securities with maturities greater than one year into shorter
dated treasury bills and short dated securities purchased under resale agreements (repo) to manage interest rate and market value
risk. Highlights of the composition of liquid assets at October 31, 2010 are as follows:

· maturities within one year increased to 49% (2009 – 9%) of liquid assets, or $921 million (2009 – $162 million);

· Government of Canada, provincial and municipal debt securities decreased to 35% (2009 – 59%) of liquid assets;

· deposits with regulated financial institutions, including Bankers’ Acceptances, decreased to 9% (2009 – 15%) of liquid assets;

· preferred shares increased to 27% of liquid assets (2009 – 23%); and

· other marketable securities remained constant at 18% of liquid assets.

Securities purchased under resale agreements totaled $178 million at October 31, 2010. This compares to October 31, 2009
when securities sold under reverse resale agreements totaled $300 million. These agreements are primarily used for cash flow
management purposes.

Securities purchased under resale agreements are included in liquid assets. These represent short-term loans to securities dealers
that require subsequent repurchase of the securities given as collateral, typically within a few days. CWB may also enter into
reverse resale agreements which are included in other liabilities. These are short-term advances from securities dealers, typically no
more than a few days in duration and require the Bank to repurchase the securities, which are comprised of government securities
or other high quality liquid securities. Short-term uncommitted and committed facilities have been arranged with a number of
financial institutions. The government insured/guaranteed mortgage portfolios held by the Bank also represent a potential source
of liquidity.

A significant portion of branch-generated deposits comes from corporate clients that tend to hold larger balances that are subject
to more volatility compared to deposits generated from personal retail clients.

The primary source of new funding is the issuance of deposit instruments. A summary of outstanding deposits by contractual
maturity date is presented in Tables 16 and 17.

Table 16 – dePoSiT maTuriTieS wiThin one year
($ millions)

Within

1 Month

1 to 3

3 Months

Cumulative

Months

to 1 Year Within 1 Year

531

2,999

1,044

–

892

1,951

$
$

4,574
$
4,082 $

892
$
816 $

1,951
$
1,514 $

531

2,999

3,887

7,417
6,412

Within

1 year

1 to 2

Years

2 to 3

Years

3 to 4

Years

4 to 5

Years

More than

5 Years

531

2,999

3,887

–

1,555

–

796

–

557

–

383

–

105

$
105
105 $

Total

531

2,999

7,178

105

10,813
9,617

Total
October 31, 2009 Total

$
$

$
7,417
6,412 $

$
1,555
1,693 $

$
796
773 $

$
557
394 $

$
383
240 $

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CWB Group 2010 Annual Report

October 31, 2010
Demand deposits

Notice deposits

Deposits payable on a fixed date

Total
October 31, 2009 Total

Table 17 – ToTal dePoSiT maTuriTieS
($ millions)

October 31, 2010
Demand deposits

Notice deposits

Deposits payable on a fixed date

Note to CWB Capital Trust

A breakdown of deposits by source is provided in Table 14 on page 47. Target limits by source have been established as part of
the overall liquidity policy and are monitored to ensure an acceptable level of funding diversification is maintained. The Bank
continues to aggressively pursue deposits through the branch network as its core funding source. At the same time, the total dollar
value of broker-generated deposits is expected to increase as the Bank grows or when higher levels of liquidity are required. Insured
deposits raised through deposit brokers remain a highly effective and valued funding source. As at October 31, 2010, CWT’s notice
account balances totaled $993 million (2009 – $931 million) reflecting ongoing business and client growth.

In addition to deposit liabilities, CWB has subordinated debentures outstanding presented in the table below:

Table 18 – SubordinaTed debenTureS ouTSTanding
($ thousands)

Interest

Rate

5.426%(1)

5.070%(2)

5.571%(3)

5.950%(4)

5.550%(5)

Total

Maturity

Date

Earliest Date

Redeemable

by CWB at Par

November 21, 2015

November 22, 2010

2010
70,000 $

March 21, 2017

March 22, 2012

March 21, 2022

March 22, 2017

June 27, 2018

June 28, 2013

120,000

75,000

50,000

2009

70,000

120,000

75,000

50,000

November 19, 2014

November 20, 2009

60,000
$ 315,000 $ 375,000

–

(1) These conventional debentures had a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate would have been reset quarterly at the Canadian dollar CDOR

90-day Bankers’ Acceptance rate plus 180 basis points. On November 22, 2010, these conventional debentures were redeemed by the Bank.

(2) These conventional debentures have a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day
Bankers’ Acceptance rate plus 155 basis points. Of the $125,000 debentures issued, $5,000 were acquired by Canadian Direct Insurance Incorporated, a wholly owned subsidiary, and have
been eliminated on consolidation.

(3) These conventional debentures have a 15-year term with a fixed interest rate for the first 10 years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day

Bankers’ Acceptance rate plus 180 basis points.

(4) These conventional debentures have a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be been reset quarterly at the Canadian dollar CDOR

90-day Bankers’ Acceptance rate plus 302 basis points.

(5) These conventional debentures had a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day

Bankers’ Acceptance rate plus 160 basis points. On November 20, 2009, these conventional debentures were redeemed by the Bank.

Outlook for Liquidity Management

Subsequent to October 31, 2010, the Bank redeemed $70 million and issued $300 million of subordinated debentures which
will temporarily increase liquidity.

The Bank continues to refine its methodologies for measuring and monitoring liquidity risk. Use of dynamic scenario analysis
has allowed for a reduction in the level of liquid asset coverage while continuing to maintain prudent liquidity standards. As the
economic recovery continues to unfold, a slight reduction in liquidity levels is expected compared to October 31, 2010.

In addition to the Consultative Document described in the Capital Management section of this MD&A, the Bank for
International Settlements (BIS) issued a companion Consultative Document entitled International Framework for Liquidity Risk
Measurement, Standards and Reporting. Although the framework was primarily aimed at internationally active banks, CWB
participated along with the other large Canadian banks by providing OSFI information to assist in assessing the impact of
the proposals. The new proposals, which were updated in July 2010, could lead to higher liquidity and funding costs for
internationally active banks. On December 1, 2010, the BIS indicated that the final rules text is expected to be published
before the end of 2010. It also stated that the new liquidity coverage ratio and net stable funding ratio will be subject to an
observation period and will include a review clause to address any unintended consequences. It is not yet known how the
liquidity standards will apply to Canadian banks with predominantly domestic business.

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CWB Group 2010 Annual Report 51

contractual obligations
In addition to the obligations related to deposits and subordinated debentures discussed in the Deposits and Liquidity Management
sections on pages 46 and 48 of this MD&A, as well as Notes 14, 18, 21, 29 and 37 of the consolidated financial statements, the
following contractual obligations are outstanding at October 31, 2010.

Table 19 – conTracTual obligaTionS
($ thousands)

Lease commitments

Purchase obligations for capital expenditures

October 31, 2010
October 31, 2009

capital ManageMent

Highlights of 2010

Within 1

Year

1 to 3

Years

4 to 5

Years

More than

5 Years

Total

$
$

8,437

16,144

15,173

19,636

59,390

538

310

–

8,975
$
8,875 $

16,454
$
16,481 $

15,173
$
15,646 $

19,636
$
27,124 $

848

60,238
68,126

· Maintained strong Tier 1 and total capital adequacy ratios of 11.3% and 14.3%, respectively.

· Increased the ratio of tangible common equity to risk-weighted assets to 8.5%, up from 8.0% in 2009.

Subsequent Highlights

· In November 2010, issued $300 million and redeemed $70 million of subordinated debentures.

· In December 2010, the Board of Directors declared a quarterly cash dividend of $0.13 per common share, an increase of

$0.02 per share (18%) from both the previous quarterly cash dividend and the quarterly cash dividend one year earlier. The
Board of Directors also declared a cash dividend of $0.453125 per Series 3 Preferred Share.

Capital funds are managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors
and take into account forecasted capital needs and markets. Under normal market conditions, the goal is to maintain adequate
regulatory capital to be considered well capitalized, protect customer deposits and provide capacity for internally generated growth
and strategic opportunities that do not otherwise require accessing the public capital markets, all while providing a satisfactory return
for common shareholders. Consistent with Basel II guidelines described below, CWB has implemented an Internal Capital Adequacy
Assessment Process (ICAAP) to help ensure that capital levels remain adequate in relation to current and future risks.
In 2008 and 2009, the global financial crisis led to significant demand for increased capital levels, particularly from investors. The
Canadian financial industry responded by issuing capital during the period of heightened market uncertainty, and by maintaining
stable dividends and restricting share buybacks. In 2010, the overall market normalized and international banking regulators issued
several press releases to clarify the next round of capital guidelines, commonly known as Basel III. These releases provided more
certainty and eased requirements for increased capital conservatism previously requested by OSFI. Subsequent to year end, the
Bank redeemed $70 million of its existing subordinated debentures and issued $300 million of new subordinated debentures in the
capital markets. On December 6, 2010, the Bank’s Board of Directors declared a quarterly dividend of $0.13 per CWB common
share payable in January 2011. This represents an increase of $0.02 (18%) per share compared to the previous quarterly dividend
paid in October 2010.

The Bank has a share incentive plan that is provided to officers and employees who are in a position to materially impact the longer
term financial success of the Bank, as measured by share price appreciation and dividends. Note 20 to the consolidated financial
statements details the number of options outstanding, the weighted average exercise price and the amounts exercisable at year end.
Holders of CWB’s common shares and holders of any other class of shares deemed eligible by the Bank’s Board of Directors are
offered the choice to direct cash dividends paid toward the purchase of common shares through a dividend reinvestment plan
(DRIP). Further details regarding the Bank’s DRIP are available at www.cwbankgroup.com/investor_relations.

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CWB Group 2010 Annual Report

Basel II Capital Adequacy Accord

OSFI currently requires banks to measure capital adequacy in accordance with published guidelines for determining risk-adjusted
capital and risk-weighted assets, including off-balance sheet commitments, which are commonly referred to as Basel II. CWB uses
the Standardized Approach to calculate risk-weighted assets for both credit and operational risk. The Standardized Approach for
credit risk applies a weighting of 0% to 150% based on the deemed credit risk for each type of asset. As an example, a loan that is
fully insured by CMHC is applied a risk weighting of 0% as the Bank’s risk of loss is nil, while typical uninsured commercial loans
are assigned a risk weighting of 100% to reflect the higher level of risk associated with this type of asset. The ratio of regulatory
capital to risk-weighted assets is calculated and compared to CWB’s ICAAP thresholds and OSFI’s standards for Canadian financial
institutions. Off-balance sheet items, such as the notional amount of derivatives and some credit commitments, are included in the
calculation of risk-weighted assets and both the credit risk equivalent and the risk-weighted calculations are prescribed by OSFI.
National Leasing’s off-balance sheet securitized asset portfolio is reflected in a deduction from both Tier 1 and total capital. As
Canadian Direct is subject to separate OSFI capital requirements specific to insurance companies, the Bank’s investment in CDI is
deducted from total capital and CDI’s assets are excluded from the calculation of risk-weighted assets.

Current regulatory guidelines require banks to maintain a minimum ratio of capital to risk-weighted assets and off-balance sheet
items of 8%, of which 4% must be core capital (Tier 1) and the remainder supplementary capital (Tier 2). However, OSFI has
established that Canadian banks need to maintain a minimum total capital adequacy ratio of 10% with a Tier 1 ratio of not less
than 7%. CWB’s Tier 1 capital is primarily comprised of common shareholders’ equity, preferred shares and innovative capital
(to the regulatory maximum of 15% of net Tier 1 capital), while Tier 2 capital primarily includes subordinated debentures (to
the regulatory maximum amount of 50% of net Tier 1 capital) and the inclusion of the general allowance for credit losses (to a
prescribed regulatory maximum). Refer to Table 20 for additional details on CWB’s capital structure and regulatory capital ratios.

The Bank complied with all internal and external capital requirements in 2010.

Basel III Capital Adequacy Accord

On December 1, 2010, the Basel Committee on Banking Supervision of the BIS (the Committee) announced that it had agreed
on the Basel III rules text which supports the global standards on capital adequacy and liquidity. The rules text is expected to be
published by the end of 2010 and will include the transitional arrangements and grandfathering rules. The standards were endorsed
by the G20 Leaders at their Seoul Summit in November after the Committee’s Consultative Document entitled Strengthening the
Resilience of the Banking Sector issued in December 2009 was updated in July and September 2010. Transition to the new standards
is expected to begin in 2013 with full compliance by 2019.

Although the final international rules text has not yet been published and OSFI must determine how to implement the proposals,
the following significant capital changes relevant to CWB are expected:

· Increased focus on tangible common equity.

· All forms of non-common equity, such as conventional subordinated debentures and preferred shares, must include a clause that
would require conversion to common equity in the event that OSFI deems the institution to be insolvent or a government is
ready to inject a “bail out” payment. Some grandfathering of existing capital instruments is expected.

· Innovative Tier 1 instruments, such as CWB’s WesTS, will no longer qualify.

· An investment in insurance subsidiary is no longer deducted from capital except for any amount that exceeds 15% of tangible

common equity.

· Potential changes in the risk-weighting or capital treatment for investments in the regulatory capital of other

financial institutions.

CWB currently has a very strong capital position and expects implementation of the final set of standards should be relatively
straightforward to manage given the lack of complexity in the Bank’s current composition of regulatory capital.

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CWB Group 2010 Annual Report 53

Table 20 – caPiTal STrucTure and regulaTory raTioS aT year end
($ thousands)

Change from

2010

2009

Tier 1 Capital

Retained earnings

Common shares

Preferred shares

Contributed surplus

Innovative capital instrument(2)

Non-controlling interest in subsidiary

Less goodwill of subsidiaries

Less securitization

Total

Tier 2 Capital

General allowance for credit losses (Tier A)(3)

Accumulated unrealized gains on available-for-sale securities, net of tax(1)

Subordinated debentures (Tier 2B)(4)

Total

Less investment in insurance subsidiary

Less securitization

Total Regulatory Capital
Regulatory Capital to Risk-Weighted Assets

Tier 1 capital

Tier 2 capital

Less investment in insurance subsidiary and securitization

Total Regulatory Capital Adequacy Ratio
Assets to Regulatory Capital Multiple(5)

$ 614,710 $ 511,784 $ 102,926
52,872

226,480

279,352

209,750

21,291

105,000

180

(37,723)

(8,880)

209,750

19,366

105,000

267

–

1,925

–

(87)

(9,360)

(28,363)

–

(8,880)

1,183,680

1,063,287

120,393

59,603

16,119

315,000

390,722

(68,993)

61,153

2,118

380,000

443,271

(1,550)

14,001

(65,000)

(52,549)

(56,768)

(12,225)

(8,880)

(8,880)
$ 1,496,529 $ 1,449,790 $ 46,739

–

11.3%

3.7

(0.7)

14.3%

8.5

11.3%

4.7

(0.6)

15.4%

8.1

–%

(1.0)

(0.1)

(1.1)%

0.4

(1) Accumulated other comprehensive income related to unrealized losses on certain available-for-sale equity securities, net of tax, reduces Tier 1 capital, while unrealized gains on certain

available-for-sale securities, net of tax, increases Tier 2 capital.

(2) The innovative capital instrument consists of CWB’s WesTS and may be included in Tier 1 capital to a maximum of 15% of net Tier 1 capital. Any excess innovative capital outstanding is

included in Tier 2B capital.

(3) Banks are allowed to include their general allowance for credit losses up to a prescribed percentage of risk-weighted assets in Tier 2A capital. At October 31, 2010, the Bank’s general

allowance represented 0.57% (2009 – 0. 65%) of risk-weighted assets.

(4) Tier 2B capital may be included in Tier 2 capital to a maximum of 50% of net Tier 1 capital. Any excess Tier 2B capital is included in capital as net Tier 1 capital increases. At October 31,

2010 and October 31, 2009 all subordinated debentures are included in Tier 2B capital.

(5) Total assets plus off-balance sheet credit instruments, such as letters of credit and guarantees, less goodwill divided by regulatory capital.

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CWB Group 2010 Annual Report

Table 21 – riSk-weighTed aSSeTS
($ thousands)

Corporate

Sovereign

Bank

Retail residential mortgages

Other retail

Excluding small business entities

Small business entities

Equity

Undrawn commitments

Operational risk

Other

As at October 31, 2010
As at October 31, 2009

Table 22 – riSk-weighTed caTegory
($ thousands)

Cash,

Securities

and Resale

Agreements

Loans

Other

Items

2010

Total

Risk-

Weighted

Assets

54,513 $

7,939,691 $

– $

7,994,204 $

7,731,941

635,830

507,514

–

550,602

–

10,739

53,644

1,664,601

161,496

753,166

–

139,018

–

56,406

–

47,749

303,956

646,569

561,158

1,664,601

161,496

753,166

550,602

139,018

47,749

360,362

19,443

309,201

467,492

117,945

572,527

298,079

137,523

596,864

238,603

$
$

1,748,459 $
2,071,304 $

10,778,761 $
9,530,655 $

351,705 $
220,260 $

12,878,925 $
11,822,219 $

10,489,618
9,395,679

150% and

2010

20%

35%

50%

75%

100%

greater

Balance Weighted

31,742 $

18,365 $

– $ 512,356 $

– $ 7,351,042 $

80,699 $ 7,994,204 $ 7,731,941

612,613

18,140

305,747

–

14,660

–

15,816

240,721

–

646,569

19,443

561,158

309,201

395,657

–

1,227,085

–

15,386

26,473

–

1,664,601

467,492

625

3,309

–

6,738

2,912

315,654

–

111,095

10,944

–

152,756

711,483

29,721

1,307

5,741

161,496

117,945

753,166

572,527

–

234,948

–

550,602

298,079

13,079

122,389

3,550

139,018

137,523

–

47,749

596,864

7,641

230,682

–

360,362

238,603

Corporate

Sovereign

Bank

Retail residential

mortgages

Other

Excluding small

business entities

Small business entities

Equity

Undrawn commitments

Operational risk

Other

As at October 31, 2010 $ 1,155,071 $ 678,500 $ 1,227,085 $ 527,016 $ 900,345 $ 8,251,862 $ 139,046 $ 12,878,925 $ 10,489,618
As at October 31, 2009 $ 1,442,891 $ 762,494 $ 812,211 $ 177,204 $ 1,101,917 $ 7,385,364 $ 140,138 $ 11,822,219 $ 9,395,679

knowing whAt works

CWB Group 2010 Annual Report 55

At as October 31, 2010, the total capital adequacy ratio was 14.3% (2009 – 15.4%), of which 11.3% (2009 – 11.3%) was Tier 1
capital. Total regulatory capital increased $47 million over 2009, primarily from the combination of:

· earnings, net of dividends and the purchase of warrants for cancellation, of $103 million;

· common shares issued on the acquisition of National Leasing ($43 million), exercise of options ($7 million) and dividend

reinvestment plan ($3 million);

· a net change related to accumulated after-tax unrealized gains on available-for-sale securities of $14 million;

· an increase of $28 million in the deduction for goodwill of subsidiaries related to the National Leasing acquisition;

· a new $18 million deduction related to NL’s securitized assets; and

· an increase of $12 million in the deduction for investment in insurance subsidiary.

In November 2010, subsequent to year end the Bank issued $300 million and redeemed $70 million of subordinated debentures.
The new debentures qualify as Tier 2 capital and, including the impact of these transactions, the pro forma total capital ratio as at
October 31, 2010 was 16.4%.

Outlook for Capital Management

CWB expects to remain very well capitalized with the Basel II Tier 1 and total capital ratios staying well above the current
regulatory minimums of 7% and 10%, respectively. The ongoing retention of earnings and the November 2010 subordinated
debenture issue should support capital requirements associated with the anticipated achievement of the 2011 minimum
performance targets. The Bank’s very strong capital ratios are also currently above the targeted ICAAP ranges, assuming a
normal operating environment, and provide considerable flexibility to pursue strategic growth opportunities. Management
continues to evaluate alternatives to deploy capital for the long-term benefit of CWB shareholders, which includes the
potential for strategic acquisitions.

Implementation of the final Basel III framework is expected to be relatively straightforward to manage given CWB’s very
strong capital position and the lack of complexity in the Bank’s current composition of regulatory capital. Management will
continue to carefully assess the impact on CWB’s capital strategies as the standards are finalized and leading up to the initial
transition expected in 2013.

financial instruMents anD other instruMents
As a financial institution, most of CWB’s balance sheet is comprised of financial instruments and the majority of net income results
from gains, losses, income and expenses related to the same.

Financial instrument assets include cash resources, securities, securities purchased under resale agreements, loans and derivative
financial instruments. Financial instrument liabilities include deposits, securities sold under repurchase agreements, derivative
financial instruments and subordinated debentures.

The use of financial instruments exposes the Bank to credit, liquidity and market risk. A discussion of how these and other risks are
managed can be found in the Risk Management section on pages 68 to 72 of this MD&A.

Further information on how the fair value of financial instruments is determined is included in the Financial Instruments Measured
at Fair Value discussion in the Critical Accounting Estimates section of this MD&A on page 63.

Income and expenses are classified as to source, either securities or loans for income, and deposits or borrower funds for expense.
Gains on the sale of securities, net, are shown separately in other income.

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CWB Group 2010 Annual Report

Derivative Financial Instruments

More detailed information on the nature of derivative financial instruments is shown in Note 12 to CWB’s consolidated financial
statements. The notional amounts of derivative financial instruments are not reflected on the consolidated balance sheets.

Table 23 – derivaTive Financial inSTrumenTS
($ thousands)

Notional Amounts

Interest rate contracts(1)

Equity contracts(2)

Foreign exchange contracts(3)

Total

2010

2009

47,550 $ 235,000
2,000

500

57,032

2,496
$ 105,082 $ 239,496

(1) Interest rate contracts are used as economic hedging devices to manage interest rate risk. The outstanding contracts mature between November 2010 and April 2014. The total gross positive
replacement cost of interest rate contracts was nil (2009 – $2,265). The market value in the prior year represents an unrealized gain, or the approximate payment the Bank would receive if
these contracts were unwound and settled.

(2) Equity contracts are used to offset the return paid to depositors on certain deposit products where the return is linked to a stock index. The outstanding contract matures March 2011.

The total gross positive replacement cost was $2 (2009 – nil).

(3) U.S. dollar foreign exchange contracts are used from time to time to manage the difference between U.S. dollar assets and liabilities. At October 31, 2010, there were US$55,870

(2009 – US$2,233) of forward foreign exchange contracts outstanding that mature between November 2010 and July 2011.

The active use of interest rate contracts remains an integral component in managing the Bank’s short-term gap position; however, the
volume of outstanding contracts (measured by the notional amount) has decreased from 2009 despite the addition of $48 million of
notional amount related to National Leasing. During 2010, CWB allowed outstanding interest rate swaps designated as cash flow
hedges for interest rate risk to mature without replacement. This strategy positions CWB to benefit further in a period of increasing
interest rates while maintaining interest rate risk within prudent policy guidelines. Derivative financial instruments are entered into
only for the Bank’s own account and CWB does not act as an intermediary in this market. Transactions are entered into on the basis
of industry standard contracts with approved counterparties subject to periodic and at least annual review, including an assessment of
the credit worthiness of the counterparty. Policies regarding the use of derivative financial instruments are approved, reviewed and
monitored on a regular basis by ALCO and reviewed and approved by the Board of Directors at least annually.

acQuisitions
On February 1, 2010, the Bank acquired 100% of the outstanding common shares of National Leasing in exchange for $53 million
in cash, 2,065,088 common shares of the Bank (equating to an equivalent dollar value of $43 million) and contingent consideration
for a total cost of $127 million. Both the Bank and the vendors have the option to trigger payment of the contingent consideration
no earlier than November 1, 2012. The final amount of the contingent consideration is not yet determinable and, under Canadian
GAAP, any change will be recognized as an adjustment to goodwill in the period in which the contingency is resolved.

National Leasing is a commercial equipment leasing company for small to mid-size transactions headquartered in Winnipeg,
Manitoba. The average size of each lease transaction has historically been approximately $20,000. The company has representation
across Canada with the largest concentration of leases sourced in Ontario. At the acquisition date, National Leasing had over
58,000 lease agreements with a collective book value of approximately $657 million, including securitized assets, which comprised
approximately one half of the portfolio.

Details of the fair values of assets and liabilities acquired are as follows:

ASSETS AND LIABILITIES ACqUIRED AT FAIR VALUE
($ thousands)

Leases

Intangible assets

Goodwill

Retained interest in securitized assets

Long-term debt

Future income tax liabilities

Other items, net

Net assets acquired

$ 322,512

40,708

27,937

19,109

(270,630)

(10,611)

(2,407)

$ 126,618

knowing whAt works

CWB Group 2010 Annual Report 57

Intangible assets include customer relationships, computer software, non-competition agreements, lease administration contracts
and trademarks. The trademark, which has an estimated value of $1,610, is not subject to amortization. National Leasing’s financial
results, the goodwill and other intangible assets related to the acquisition are included in the banking and trust segment. The total
amount of goodwill and intangible assets are not deductible for income tax purposes. The long-term debt was repaid immediately
after the acquisition.

The acquisition was accretive to the Bank’s consolidated earnings per diluted common share in fiscal 2010 and resulted in only
a slight reduction in the Bank’s regulatory capital ratios.

off-balance sheet arrangeMents
In the normal course of business, CWB is involved in off-balance sheet arrangements, which are primarily guarantees.

Guarantees

Significant guarantees provided by CWB in the ordinary course of business include guarantees and standby letters of credit
provided to third parties and commitments to extend credit to customers. CWB also issues business credit cards through an
agreement with a third party card issuer and indemnifies the card issuer from loss if there is a default on the issuer’s collection of
the business credit card balances. More detailed information on guarantees is available in Note 21 to CWB’s consolidated financial
statements for 2010.

OPERATING SEGmENT REvIEw
CWB operates in two business segments: 1) banking and trust, and 2) insurance. Segmented information is also provided in Note
33 of the audited consolidated financial statements.

banking anD trust

Highlights of 2010

· Acquired National Leasing Group Inc., effective February 1, 2010.

· Realized record net income of $151.2 million, an increase of 56% ($54.0 million).

· Achieved record total revenues (teb) of $405.0 million, an increase of 33% ($100.8 million), reflecting a 65 basis point

improvement in net interest margin (teb) to 2.73% and 14% loan growth.

· Maintained satisfactory credit quality and a provision for credit losses measured as a percentage of average loans

of 21 basis points.

· Increased branch and trust generated deposits 8%, with the demand and notice component up 12%.

· Opened new full-service commercial and retail banking centres in Sherwood Park, Alberta and Surrey, BC.

· Surpassed $6 billion of assets under administration in CWT.

The operations of the banking and trust segment include business and retail banking services, including equipment leases offered
by NL, the offering of third party mutual funds through CWF, personal and corporate trust services provided through CWT and
Valiant, and wealth management services offered through Adroit. Optimum Mortgage, a division of CWT, underwrites residential
mortgages within Western Canada and select markets in Ontario. With a focus on mid-market commercial banking, real estate
financing, equipment financing and energy lending, CWB’s proven strategy is based on building strong customer relationships and
providing value-added services to businesses and individuals across Western Canada and other select markets. The Bank delivers a
wide variety of retail financial products and services, including personal loans and mortgages, deposit accounts, investment products
and other banking services.

knowing whAt works
CWB Group 2010 Annual Report

Customer access is provided through a network of 39 client-focused branches in select locations across the four western provinces.
Internet and telephone banking services are also offered. Canadian Direct Financial® is an Internet-based division of the Bank
that offers a range of deposit and registered savings products directly to customers who are not served by the branch network.
Optimum Mortgage sources residential mortgages through a network of over 8,500 mortgage brokers located in Western Canada
and Ontario. National Leasing specializes in small and mid-sized commercial equipment leases and has representation across
Canada. CWT provides a varied range of products and services, including self-directed RRSPs and RRIFs, and corporate and
group trust services to independent financial advisors, corporations and individuals. Valiant offers stock transfer and corporate
trustee services to public companies. Adroit is an Edmonton-based firm that specializes in wealth management for individuals,
corporations and institutional clients, including non-profit organizations, colleges, foundations and endowment funds.

Table 24 – banking and TruST highlighTS(1)
($ thousands)

Net interest income (teb)

Other income

Total revenues (teb)

Provision for credit losses

Non-interest expenses

Provision for income taxes (teb)

Non-controlling interest in subsidiary

Net income

Efficiency ratio (teb)

Efficiency ratio

Net interest margin (teb)

Net interest margin

Average loans ($ millions)(3)

Average assets ($ millions)(3)

Change from

2010

2009

321,640

230,227

2009

40%

83,393

405,033

20,413

179,734

53,438

215

74,013

304,240

13,500

147,571

45,763

232

151,233

97,174

(7)

56%

44.4%

45.5

2.73

2.64

9,806

11,792

48.5%

(410)bp(2)

49.7

2.08

2.02

9,007

11,055

(420)

(1) See page 30 for a discussion of teb and non-GAAP measures.
(2) bp – basis points.
(3) Loans and assets are disclosed on an average daily balance basis as this measure is most relevant to a financial institution and is the measure reviewed by management.

Record banking and trust net income of $151.2 million was up 56% ($54.1 million) over 2009 on 33% ($100.8 million) growth
in total revenues (teb). Growth in total revenues (teb) reflects net interest income (teb) that was 40% ($91.4 million) higher
compared to the prior year due to the positive contributions from a 65 basis point improvement in net interest margin to
2.73% and 14% loan growth. The significant increase in net interest margin was mainly the result of lower deposit costs, more
favourable yields on fixed rate loans, a shift in the deposit mix and lower liquidity levels. More favourable yields on fixed rate loans
reflect the positive impact from NL’s comparatively higher yielding lease portfolio as well as wider spreads on certain product
lines, particularly early in the year. Other income increased 13% ($9.4 million) as strong results across CWB’s core operations,
including contributions from the second quarter acquisition of NL, more than offset a $12.8 million decline in gains on sale of
securities and slightly lower foreign exchange gains. Non-interest expenses increased 22% ($32.2 million) with the acquisition
of NL contributing $20.1 million of the year-over-year difference. The remainder of the increase in non-interest expenses was
mainly attributed to additional staff complement and ongoing investment in premises and technology infrastructure to support
continued business growth. Very strong growth in total revenues (teb) more than offset the impact of higher non-interest
expenses and led to a 410 basis point improvement in the efficiency ratio (teb) to a new benchmark of 44.4%.

Growth in total branch and trust deposits increased 8%, while the demand and notice component of branch and trust deposits was
up 12%. Growth in branch and trust generated deposits reflect ongoing execution of strategies to further enhance and diversify
the Bank’s core funding sources and CWT’s continued success in generating deposits through its fiduciary trust business.

Significant infrastructure initiatives completed in 2010 included additional full-service branches in Sherwood Park, Alberta and
Surrey, BC, as well as further upgrades and expansions to systems and existing premises.

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CWB Group 2010 Annual Report 59

Total assets under administration, including both trust assets under administration and third-party lease service agreements,
totaled $8,531 million at October 31, 2010, compared to $5,467 million one year ago. Growth in assets under administration
reflects the acquisition of NL and businesses growth in CWT. A portion of assets under administration are held in investment
accounts, including self-directed RRSP and RRIF accounts, which numbered 46,009 (2009 – 44,143), an increase of 4% from
one year ago. Assets under management were $795 million at October 31, 2010, compared to $878 million one year ago as new
account growth was more than offset by the loss of a larger institutional client that was a competitor of a subsidiary. Assets under
administration and assets under management are not reflected in the consolidated balance sheets (see Note 27 to the consolidated
financial statements).

Figure 4 – number oF cwT inveSTmenT accounTS

2010

2009

2008

2007

2006

46,009

44,143

42,402

37,473

31,716

Outlook for Banking and Trust

The outlook for 2011 includes expectations for continued strong performance across all business lines. Management expects
to achieve its 10% minimum loan growth target driven by an expanding market presence, moderate economic growth
in Canada and an ongoing commitment to relationship-based business banking that provides a competitive advantage
to increase market share. The Bank will also maintain advertising and communication initiatives to improve market
awareness within key geographic regions. Loan growth should further benefit from expected performance in both NL and
Optimum. NL’s volume of new deals was tracking near record levels at the end of 2010 despite post-recessionary impacts
and management is optimistic about opportunities to build this business by strengthening its market position and further
diversifying the lease portfolio. While residential sales activity has moderated considerably compared to the first half of
calendar 2010, Optimum expects continued growth in both Alt-A mortgages and the insured product. Canadian Direct
Financial® will commence offering personal mortgages via its Internet banking platform in 2011which has potential to
provide an additional source of loan growth and diversification in the future. Gains on the sale of securities are expected
to be lower in fiscal 2011, but the associated reduction in revenues should be more than offset by the positive impact of
a relatively stable net interest margin and expected loan growth, as well as a full year of contributions from NL. Credit
and retail services fee income is expected to grow in line with increased lending activity and an expanded branch network.
Ongoing growth in CWT’s fiduciary trust business will positively contribute to both fee income and deposit growth, as
this company continues to gain market share and deliver solid overall performance. Valiant has been successful in growing
its client base across each of its geographic regions, including Toronto, Calgary, Vancouver and Edmonton, and improved
capital markets activity will have a further positive impact on its performance. Adroit is also expected to make positive
contributions as the Bank continues to build its presence in wealth management services.

Management believes Western Canada’s fundamentals will be positive relative to the rest of Canada, although market
challenges continue to be apparent in certain areas. The Bank will maintain its focus on disciplined credit underwriting
and direct appropriate resources towards continued realization efforts and the ongoing resolution of problem accounts.
The dollar level of gross impaired loans is expected to fluctuate even though the economic cycle has moved closer toward
sustained recovery. Largely owing to the Bank’s secured lending practices and a more favourable economic outlook, actual
loan losses should remain within CWB’s historical range of acceptable levels.

While strong fiscal responsibility will be maintained, effective execution of CWB’s strategic plan will require increased spending
in areas that enhance the Bank’s growth platform. These areas include ongoing investment in people, premises and technology
infrastructure, and also include plans for further expansion and development of the branch network. While anticipated revenue
growth will help offset the impact of planned capital investment and higher non-interest expenses related to continued business
growth, the efficiency ratio (teb) will likely increase compared to the record level achieved in fiscal 2010.

knowing whAt works
CWB Group 2010 Annual Report

insurance

Highlights of 2010

· Record net income of $12.4 million, up 36%.

· Gross written premiums of nearly $125 million, up 7%.

· Claims loss ratio of 62% and a combined ratio of 91%.

· Positive contribution from the Alberta auto Risk Sharing Pools (the Pools).

· Customer retention rate of 87%.

· Customer satisfaction rating of 98%.

· Launched secondary auto product offerings late in the year, including travel trailers and motorhomes.

Canadian Direct provides auto and home insurance products in BC and Alberta and has more than 185,000 policies outstanding.
Policy distribution channels include two dedicated call centres, the Internet and, for customers in BC, the option to purchase auto
insurance through select broker networks. Offering enhanced electronic fulfillment of CDI’s products and services is an important
part of the overall business strategy, and continued development of this technology will remain a priority.

Canadian Direct’s mission is to provide customers with attractively priced products and a high level of customer service – “better
insurance for less money”. The core strategy includes the use of sophisticated underwriting techniques to offer more competitively
priced insurance to better risk customers. The Canadian Direct Insurance brand is marketed through several media channels,
including television, radio, newspapers and over the Internet. It has established a very high level of awareness in the BC market
and the level of awareness in Alberta continues to grow. All claims are administered by Canadian Direct’s head office in BC using
imaging technology and effective workflow management to maintain a paperless office environment. CDI’s use of technology
helps to maintain a favourable expense ratio without compromising customer satisfaction. CDI currently retains a high percentage
of its customers, a measure that confirms its success in providing quality products and services at competitive prices.

Table 25 – inSurance highlighTS(1)
($ thousands)

Net interest income (teb)

Other income

Net earned premiums

Commissions and processing fees

Net claims and adjustment expenses

Policy acquisition costs

Insurance revenues (net)

Gains on sale of securities

Total revenues (teb)

Non-interest expenses

Provision for income taxes (teb)

Net income

Number of policies outstanding at October 31

Gross written premiums

Claims loss ratio

Expense ratio

Combined ratio

Alberta automobile insurance Risk Sharing Pools impact on net income before tax

Average total assets ($ millions)(4)

2010

7,024

2009

6,127

Change from

2009

15%

111,368

2,347

(68,641)

(23,358)

21,716

486

29,226

11,746

5,092

12,388

104,062

2,852

(68,996)

(20,802)

17,116

483

23,726

10,611

4,004

9,111

185,167

175,662

124,451

116,828

(18)

(1)

36%

62%

3,255

215

67%

(292)

198

(500)bp(2)

200

(300)

nm(3)

(1)
(2)

See page 30 for a discussion of teb and non-GAAP measures.
bp – basis points.

(3) nm – not meaningful.
(4) Average total assets are disclosed on an average daily balance basis as this measure is most relevant

to a financial institution and is the measure reviewed by management.

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CWB Group 2010 Annual Report 61

Canadian Direct reported record net income of $12.4 million, up 36% ($3.3 million) over 2009 reflecting continued policy
growth and a 7% increase in net earned premiums. Net claims expense was relatively unchanged from last year, but included a
$3.0 million increase from the core lines of business, offset by a $3.3 million decrease in claims from the Pools. Claims experience
in the Alberta home line was negatively impacted by a severe hailstorm in July. The BC auto product line experienced higher
severity in its liability coverage driven by negative developments on certain bodily injury claims late in the year. The lower claims
costs from the Pools included a $1.5 million reduction to unpaid claims reserves specifically related to a December 2009 decision
by the Supreme Court that denied leave to appeal the cap on minor injuries suffered in an automobile accident. Following the
Supreme Court decision, the Pools’ unpaid claims reserves originally recorded in the fourth quarter of 2008 were reduced.

Canadian Direct’s share of the Pools resulted in a positive before tax contribution of $3.3 million, compared to a $0.3 million
before tax loss in 2009. The Pools’ results included the $1.5 million reduction in unpaid claims reserves noted previously.
Canadian Direct’s claims ratio at 62% was 5% lower than last year, while the combined ratio at 91% was 3% lower. Policies
outstanding grew by 5%, while the overall policy retention rate was unchanged from last year at 87%.

Outlook for Insurance Operations

The outlook for 2011 reflects expectations for continued growth in both policies outstanding and premiums written, while
cost increases will be kept in line with revenue growth. Canadian Direct will continue to meet the ongoing challenges
brought about by the pricing strategies of the Insurance Corporation of British Columbia through expansion of the broker
distribution network for BC auto to help drive growth in that line. In Alberta, the Auto Insurance Rate Board (AIRB)
announced a mandatory 5% rate reduction for basic coverage on private passenger vehicles, which takes effect November
1, 2010. The reduction will put downward pressure on premium revenue. This marks the second consecutive year that a
5% rate reduction was mandated by the AIRB. Additional rate reductions could be mandated in the coming year that would
also negatively impact the Alberta auto product line. In the home product lines, Canadian Direct will review the coverage it
provides and likely increase rates to cover the costs of the increasing frequency of storms and water-related losses.

The 2011 claims loss ratio is expected to be in the mid-range between 60% and 70%. The comparatively low claims ratio
in 2010 included the Pools’ positive impact and expectations for the current year are relatively consistent with experience in
2009 and prior years. The loss ratio can be negatively impacted by seasonal storm activity, particularly in the winter months.
The target for the combined ratio is 94%. Canadian Direct will continue to enhance its Internet-based technology platform,
which will facilitate new growth opportunities, including the ability to sell its home product online.

SUmmARY OF QUARTERLY RESULTS
The financial results for each of the last eight quarters are summarized in the following table. In general, CWB’s performance
reflects a consistent growth trend, although the second quarter contains three fewer revenue-earning days.

The Bank’s quarterly financial results are subject to some fluctuation due to its exposure to property and casualty insurance.
Insurance operations, which are primarily reflected in other income (refer to Operating Segment Review – Insurance on page 61),
are subject to seasonal weather conditions, including higher claims experience during winter driving months, cyclical patterns
of the industry and natural catastrophes. Mandatory participation in the Alberta auto Risk Sharing Pools can also result in
unpredictable quarterly fluctuations. Quarterly results can also fluctuate due to the recognition of periodic income tax items,
as was the case in the third quarter of 2010 when an income tax recovery and related interest receipt from certain prior period
transactions increased net income by approximately $8.3 million.

The acquisition of National Leasing was effective February 1, 2010 and the results of its operations and financial position are
consolidated as part of the Bank’s overall financial performance beginning with the second quarter of 2010 (refer to Results by
Business Segment – Banking and Trust on page 58). The acquisition had a positive impact on all categories in the table below
except the provision for credit losses. The impact of the higher loan loss experience inherent in NL’s portfolio compared to the
Bank’s core lending business is more than offset by the relatively higher yield earned on its portfolio.

Throughout fiscal 2009 the Bank’s quarterly net interest income, reflected in total revenues (teb), was negatively impacted by compression
of the net interest margin that mainly resulted from consecutive reductions in the prime lending interest rate, coupled with significantly
higher deposit costs and other spinoff effects of the global financial crisis. In the first quarter of 2010, net interest margin recovered to
more typical levels achieved before the onset of the global financial crisis. Gains on sale of securities, reflected in other income, were
unusually high throughout 2009 and the first two quarters of 2010 also mainly due to factors associated with the financial crisis, including
a steep interest rate curve and wide credit spreads that allowed the Bank to capitalize on specific investment strategies.

knowing whAt works
CWB Group 2010 Annual Report

Comprehensive management’s discussion and analysis along with unaudited interim consolidated financial statements for each
quarter, including the fourth quarter of fiscal 2010, are available for review on SEDAR at www.sedar.com and on the Bank’s
website at www.cwbankgroup.com. Copies of the quarterly reports to shareholders can also be obtained, free of charge, by
contacting the Bank’s Investor Relations department via email at InvestorRelations@cwbank.com.

Table 26 – quarTerly Financial highlighTS(1)
($ thousands, except per share amounts)

Net interest income (teb)

Less teb adjustment

Net interest income

per financial statements

Other income

Total revenues (teb)

Total revenues

Net income

Earnings per common share

Basic

Diluted

Diluted cash

Return on common

2010

$ 89,206

$ 85,020

$ 80,132

3,179

2,782

2,662

2009

q1
$ 74,306 $ 68,012 $ 60,934 $ 52,812 $ 54,596
1,586

2,189

2,397

1,675

2,563

86,027

22,364

82,238

26,025

77,470

30,840

71,743

26,366

111,570

111,045

110,972

100,672

108,391

108,263

108,310

39,107

46,595

37,884

98,109

40,035

0.53

0.48

0.49

0.64

0.59

0.60

0.52

0.47

0.48

0.57

0.52

65,615

22,087

90,099

87,702

30,357

0.42

0.39

58,745

24,604

85,538

83,349

28,729

0.39

0.38

51,137

22,570

75,382

73,707

21,580

0.30

53,010

22,351

76,947

75,361

25,619

0.40

0.41

shareholders’ equity (ROE)

15.1%

19.1%

16.3%

18.0%

13.7%

13.4%

11.0%

14.7%

Return on average total assets (ROA)

Efficiency ratio (teb)

Efficiency ratio

Net interest margin (teb)

Net interest margin

Provision for credit losses as

1.13

46.6

47.9

2.84

2.74

1.40

44.4

45.5

2.78

2.69

1.17

45.0

46.1

2.76

2.67

1.25

40.0

41.0

2.56

2.47

0.91

46.1

47.4

2.34

2.25

0.87

47.0

48.2

2.13

2.05

0.70

53.1

54.3

1.93

1.87

0.93

47.3

48.3

1.99

1.93

a percentage of average loans

0.21

0.23

0.16

0.15

(1) See page 30 for a discussion of teb and non-GAAP measures.

AccOUNTING POLIcIES AND ESTImATES

critical accounting estiMates
CWB’s significant accounting policies are outlined in Note 1 and with related financial note disclosures by major caption in the
consolidated financial statements. The policies discussed below are considered particularly important, as they require management
to make significant estimates or judgements, some of which may relate to matters that are inherently uncertain.

Allowance for Credit Losses

An allowance for credit losses is maintained to absorb probable credit related losses in the loan portfolio. This allowance reflects
management’s estimate of probable losses in the loan portfolio at the balance sheet date. In assessing existing credit losses,
management must rely on estimates and exercise judgement regarding matters for which the ultimate outcome is unknown. These
matters include economic factors, developments affecting particular industries and specific issues with respect to single borrowers.
Changes in circumstances may cause future assessments of credit risk to be significantly different than current assessments and may
require an increase or decrease in the allowance for credit losses. Establishing a range for the allowance for credit losses is difficult
due to the number of uncertainties involved. The general allowance for credit losses is intended to address this uncertainty. At
October 31, 2010, the Bank’s total allowance for credit losses was $78.6 million (2009 – $75.5 million) which included a specific
allowance of $19.0 million (2009 – $14.3 million) and a general allowance of $59.6 million (2009 – $61.2 million). Allowances
acquired in 2010 with the purchase of National Leasing were $2.6 million specific and $4.2 million general. Additional information
on the process and methodology for determining the allowance for credit losses can be found in the discussion of credit quality
on page 42 of this MD&A and Note 7 to the consolidated financial statements. This critical accounting estimate relates to CWB’s
banking and trust segment.

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CWB Group 2010 Annual Report 63

Provision for Unpaid Claims and Adjustment Expenses

A provision for unpaid claims is maintained, with the provision representing the amounts needed to provide for the estimated
ultimate expected cost of settling claims related to insured events (both reported and unreported) that have occurred on or before
each balance sheet date. A provision for adjustment expenses is also maintained, which represents the estimated expected costs of
investigating, resolving and processing these claims. Estimated recoveries of these costs from reinsurance ceded are included in
assets. The computation of these provisions takes into account the time value of money using discount rates based on projected
investment income from the assets supporting the provisions. The process of determining the provision for unpaid claims and
adjustment expenses necessarily involves risks that the actual results will deviate from the best estimates made. These risks vary
in proportion to the length of the estimation period and the volatility of each component comprising the liabilities. To recognize
the uncertainty in establishing these best estimates and to allow for possible deterioration in experience, actuaries are required
to include explicit margins for adverse deviation in assumptions for asset defaults, reinvestment risk, claims development and
recoverability of reinsurance balances. All provisions are periodically reviewed and evaluated in light of emerging claims experience
and changing circumstances. Changes in circumstances may cause future assessments of unpaid claims and adjustment expenses
to be significantly different than current assessments and may require an increase or decrease in the provision. In estimating the
provision for unpaid claims and adjustment expenses, a number of uncertainties are taken into account and assumptions made,
which makes it difficult to estimate a range for the provision. Further, as noted above, the provision includes a margin for adverse
deviations in assumptions. At October 31, 2010, the provision for unpaid claims and adjustment expenses totaled $80.1 million (2009 –
$81.0 million). Additional information on the process and methodology for determining the provision for unpaid claims and adjustment
expenses can be found in Note 22 to the consolidated financial statements. This critical estimate relates to CWB’s insurance segment.

Financial Instruments Measured at Fair Value

Cash resources, securities, securities purchased under resale agreements, securities sold under repurchase agreements, retained
interest in securitized assets and derivative financial instruments are reported on the consolidated balance sheets at fair value.

The fair value of a financial instrument on initial recognition is the value of the consideration given or received. Subsequent
to initial recognition, financial instruments measured at fair value that are quoted in active markets are based on bid prices for
financial assets and offer prices for financial liabilities. For derivative financial instruments or other financial assets and liabilities
where an active market does not exist, fair values are determined using valuation techniques that refer to observable market data,
including discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

The following table summarizes the significant financial assets and liabilities reported at fair value at October 31, 2010.

Table 27 – valuaTion oF Financial inSTrumenTS
($ thousands)

Financial assets

Cash resources

Securities

Securities purchased under resale agreements

Retained interest in securitized assets

Derivative related

October 31, 2010

October 31, 2009

Financial liabilities

Derivative related

October 31, 2010

October 31, 2009

Valuation Technique

Quoted

Market

Model with

Observable

Prices

Market Data

Fair

Value

187,944 $

181,143 $

6,801

1,510,187

177,954

9,703

134

–

177,954

9,703

134

1,885,922 $

1,691,330 $

194,592

2,190,847 $

2,182,022 $

8,825

992 $

300,316 $

– $

992

300,316

Notes 3, 4, 5, 12 and 30 to the consolidated financial statements provide additional information regarding these financial
instruments. This critical accounting estimate relates to both operating segments.

CWB has no direct exposure to any troubled non-bank sponsored asset-backed commercial paper, collateralized debt obligation, credit
default swaps, U.S. subprime mortgages or monoline insurers. CWB also has no direct credit exposure to sovereign debt outside of Canada.

knowing whAt works
CWB Group 2010 Annual Report

changes in accounting policies
There were no changes in accounting policies during 2010.

future changes in accounting policies

International Financial Reporting Standards

The Canadian Institute of Chartered Accountants (CICA) will transition Canadian GAAP for publicly accountable entities to
International Financial Reporting Standards (IFRS) for interim and annual financial statements effective for fiscal years beginning
on or after January 1, 2011, including comparatives for the prior year. As a result, the Bank’s consolidated financial statements
will be prepared in accordance with IFRS for the 2012 fiscal year commencing November 1, 2011 and will include comparative
information for the 2011 fiscal year.

The information provided below will allow investors and others to obtain a better understanding of our IFRS transition plan and
the resulting possible effects on such things as the Bank’s financial statements and operating performance measures. Readers are
cautioned, however, that it may not be appropriate to use such information for any other purpose. The information provided
reflects the Bank’s most recent assumptions and expectations, and there continues to be significant changes in the standards as
proposed or issued by the International Accounting Standards Board (IASB). Of the IASB’s Work Plan, the Financial Instruments
project may impact CWB significantly, and therefore, management continues to monitor the developments of this project closely.

The Bank commenced its IFRS conversion project during 2008 and established a formal project governance structure, including
an IFRS Steering Committee, to monitor the progress and critical decisions in the transition to IFRS. The Steering Committee
consists of senior levels of management from Finance, Credit Risk Management and Information Services. An external advisor has
been engaged to work with the Bank’s project staff on certain IFRS topics. Regular reporting is provided by the project team to the
Steering Committee and the Audit Committee.

IFRS Transition Plan
The Bank has embarked on a four phase project to identify and evaluate the impact of the transition to IFRS on the consolidated
financial statements and develop a plan to complete the transition. The project plan includes the following phases:

1) Diagnostic phase – This phase involved performing a high-level impact assessment to identify key areas that may be impacted by
the transition to IFRS. As a result of these procedures, the potentially affected areas were ranked as high, medium or low priority.

2) Design and planning phase – In this phase, each area identified from the diagnostic phase was addressed through a detailed impact
assessment. This phase involved specification of changes required to existing accounting policies and/or disclosures, information
systems and business processes. In addition, preliminary internal communication and training occurred during this phase.

3) Solution development phase – This phase includes the execution of any required changes to information systems and business
processes, completing formal authorization processes to approve recommended accounting policy changes, development of
draft IFRS financial statements, and delivery of training programs for the Finance staff and other groups, as necessary.

Implementation phase – The final phase will involve the collection of financial information necessary to compile IFRS-compliant
financial statements, embedding IFRS in business processes, and Audit Committee approval of IFRS financial statements.

Progress Towards Transition Plan
The Bank completed the diagnostic phase in October 2008, the design and planning phase in October 2009 and the solution
development phase is now substantially complete. The Bank’s detailed impact assessment has identified a number of differences
between IFRS and Canadian GAAP that impact CWB’s financial statements. Most of the differences identified are not expected to
have a material impact on the reported results and financial position, and the Bank has determined that CWB’s accounting policies
are largely aligned with IRFS requirements in many key areas. Of the differences identified, none will require significant changes
to the Bank’s information systems. Based on the analysis completed to date, the most significant accounting policy differences on
initial transition for the Bank due to adopting IFRS have been identified as the following:

Loan loss accounting – Although both existing Canadian GAAP and IFRS calculate loan losses using the incurred loss model, IFRS
is more specific as to what qualifies as an “incurred event.” Under IFRS, incurred losses require objective evidence of impairment,
must have a reliably measurable effect on the present value of estimated cash flows and be supported by currently observable data.
This difference is not expected to impact the calculation of the specific allowance for credit losses but may impact the estimation
of the general (or collective) allowance, which totaled $59.6 million at October 31, 2010. The Bank continues to develop its
methodology, but it is not yet determinable whether any adjustments will be required.

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CWB Group 2010 Annual Report 65

Derecognition – Under existing IFRS rules, NL’s securitized assets (totaling $199 million at October 31, 2010) would be reported
on the balance sheet, which would increase both loans and debt. However, recent IASB proposals, if adopted, would permit all
securitized pools existing prior to the transition date to remain off-balance sheet.

Consolidation – Under IFRS, a variable interest entity (VIE) is consolidated by an entity if the entity is deemed to control it,
as determined under the criteria within International Accounting Standard (IAS) 27 – Consolidated and Separate Financial Statements.
As a result, Canadian Western Bank Capital Trust will be consolidated under IFRS, which will decrease deposits and increase debt.
For more information about this special purpose entity see Note 15 of the 2010 audited consolidated financial statements.

Business Combinations – Under IFRS, contingent consideration related to a business combination is accounted for as a financial
liability and fair valued at the time of the acquisition. An adjustment of the liability to current fair value is recorded through net
income every period thereafter until settlement. Under Canadian GAAP, when the amount of contingent consideration cannot
be reasonably estimated or the outcome of the contingency cannot be determined without reasonable doubt, the liability is not
recognized until the contingency is resolved and consideration is issued or becomes issuable, and at such time, the consideration
is recorded as an adjustment of goodwill. The contingent consideration related to the 2010 NL acquisition will be fair valued
on transition to IFRS, and an adjustment is expected to increase liabilities and reduce retained earnings. Development of an
appropriate methodology to calculate the fair value of the contingent consideration is currently underway.

IFRS 1 – IFRS 1: First Time Adoption of IFRS provides a framework for the transition to IFRS. Generally, retroactive application
is applied to the opening balance sheet for the comparative 2010 year financial statements as though the Bank had always applied
IFRS. However, IFRS 1 permits both mandatory exceptions to retroactive application and optional exemptions from other IFRS
standards. The Bank has evaluated all optional exemptions under IFRS 1, with the most significant potential exemption relating
to business combinations. The Bank expects to elect not to apply IFRS 3 – Business Combinations retrospectively to business
combinations that occurred before November 1, 2010.

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CWB Group 2010 Annual Report

The following table is a summary of the Bank’s progress towards completion of selected key activities of our IFRS transition
plan as of October 31, 2010. At this time, the Bank cannot quantify the impact that the future adoption of IFRS will have on the
financial statements and operating performance measures. Additional information will be provided as CWB moves towards the
changeover date on November 1, 2011.

Key Activity

Key Milestones

Status

Identify applicable differences in
Canadian GAAP/IFRS accounting
policies and practices and design
and implement solutions.

Select IFRS 1 choices.

Develop financial statement and
related note disclosure format.

Quantify effects of transition.

T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

N
O
I
T
A
R
A
P
E
R
P

Senior management and Steering
Committee sign-off for all key
IFRS accounting policy choices
that occurred during the third
quarter of 2010.

Development and review of
draft financial statement format
commenced during the fourth
quarter of 2010 and is expected to
be completed in the first quarter
of 2011.

Define and introduce appropriate
level of IFRS expertise for each of
the following:

· Finance group

· CWB lenders

· Audit Committee & Board

of Directors

Timely training provided to align
with work under transition –
all training to be completed by
mid-2011.

Communication of effects
of transition in time for 2012
financial reporting process,
by mid-2011.

G
N
N
A
R
T

Completed the Diagnostic phase
and Design & Planning phase,
which involved a detailed impact
assessment of the differences
between Canadian GAAP
and IFRS.

Completed the analysis of
accounting policy choices.

The financial statement, related
note disclosure format, and
quantified effect of the transition
is expected to be completed during
the first quarter of 2011.

Participated in industry IFRS
specialist groups.

Finance group, Audit Committee
and Board of Directors training
occurred during Q4 2007, Q3
2009 and Q3 2010; Periodic status
reports ongoing.

Engaged a third-party subject
matter expert to assist in the
training of CWB lenders in 2009.

N
O
I
T
A
M
R
O
F
N

S
M
E
T
S
Y
S

L
O
R
T
N
O
C

T
N
E
M
N
O
R
V
N
E

Identify and address IFRS
differences that require changes to
financial systems.

Confirmation that business
processes and systems are IFRS
compliant throughout the project.

Evaluate and select methods to
address need for dual record-
keeping during 2011 (i.e. IFRS and
Canadian GAAP) for comparatives.

Confirmation that systems can
address 2011 dual record-keeping
processing requirements by the
first quarter of 2009.

Diagnostic analysis regarding
current systems completed; no
significant business processes or
system changes required.

Dual record-keeping process
confirmed during first quarter
of 2009.

Assessment of all key control and
design effectiveness implications
throughout 2010.

Completion of changes by the first
quarter of 2011.

Commenced analysis of control
requirements and expect
finalization prior to the recording
of the 2011 comparative
adjustments.

Revise existing internal control
processes and procedures
to address significant changes to
existing accounting policies and
practices, including the need for
dual record-keeping during 2011.

Design and implement internal
controls with respect to one-time
transition adjustments and
related communications.

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CWB Group 2010 Annual Report 67

RISk mANAGEmENT

The shaded areas of this MD&A represent a discussion of risk management policies and procedures relating to credit, market
and liquidity risks as required under the CICA Handbook section 3862, Financial Instruments – Disclosures which permits
these specific disclosures to be included in the MD&A. Therefore, the shaded areas presented on pages 68 to 72 of this
MD&A form an integral part of the audited consolidated financial statements for the year ended October 31, 2010.

overview
Effective risk management is central to the ability to remain financially sound and profitable and includes identifying, assessing,
managing and monitoring all aspects of risk that have potential to affect CWB’s businesses. CWB, like other financial institutions,
is exposed to several factors that could adversely affect its operating and regulatory environments, financial condition and financial
performance, and which may also influence an investor to buy, sell or hold CWB shares, deposits, debentures and other securities.
While CWB has demonstrated its ability to effectively manage these risks through conservative management practices, a strong
risk culture and a disciplined risk management approach, many of the risk factors are beyond CWB’s direct control. CWB
established a dedicated Group Risk Management function in 2010 to assist with the ongoing evolution of its overall risk
management processes.

Senior management is responsible for establishing the framework for identifying risks and developing appropriate risk
management policies and frameworks. The Board of Directors, either directly or through its committees, reviews and
approves the key policies and implements specific reporting procedures to enable them to monitor ongoing compliance over
significant risk areas. At least annually, a report on risks and risk management policies is presented to the Board and/or Board
committees for review and assessment.

The Loans Committee of the Board, which maintains a close working relationship with the credit risk management group, is
responsible for the:

· review and approval of credit risk management policies;

· review and approval of loans in excess of delegated limits;

· review and monitoring of impaired and other less than satisfactory loans; and,

· recommendation of the adequacy of the allowance for credit losses to the Audit Committee.

The Asset Liability Committee (ALCO) meets monthly and provides management oversight related to the risks of banking
and trust operations, other than credit risk. ALCO is a senior management committee chaired by the executive with
responsibility for Treasury, with the President and Chief Executive Officer (CEO) and other senior officers as members.
ALCO is responsible for:

· ensuring that risks other than credit risk are identified and assessed and that appropriate policies are in place and effective;

· the establishment and maintenance of policies and programs for liquidity management and control, funding sources,

investments, foreign exchange risk, interest rate and derivatives risk, and trust services risk; and,

· overseeing compliance and strategy respecting diversification of product offerings and management of risks.

Asset liability management policies are approved and reviewed at least annually by the Board with quarterly status reporting
also provided.

The Operations Committee meets regularly, is comprised of supervisory and management personnel from all areas of banking
operations, and is chaired by a member of senior management. This committee is responsible for developing appropriate policies
and procedures, including internal controls, respecting day-to-day, routine banking operations.

The internal audit department performs audits in all areas of the Bank, audits all subsidiaries, and reports the results directly to
senior management, as well as the Bank’s CEO and Audit Committee. Internal audit of NL’s operations will commence in 2011.

knowing whAt works
CWB Group 2010 Annual Report

creDit risk

Credit risk is the risk that a financial loss will be incurred due to the failure of a counterparty to discharge its contractual
commitment or obligation to CWB. Credit risk is managed through lending policies and procedures, the establishment
of lending limits and a defined approval process. Risk diversification is addressed by establishing portfolio limits by
geographic area, industry sector and product. CWB’s policy is to limit connected corporate borrowers’ loan authorizations
to not more than 10% of the Bank’s shareholders’ equity. The limit for any single exposure is presently set at $50
million. CWB customers with larger borrowing requirements can be accommodated through loan syndications with other
financial institutions.

The Bank employs and is committed to a number of important principles to manage credit exposures, which include:

· a Loans Committee of the Board whose duties include approval of lending policies, establishment of lending limits

for the Bank, the delegation of lending limits and the approval of larger credits, as well as quarterly reports prepared
by management on watch list loans, impaired loans, the adequacy of the allowance for credit losses, environmental risk
and diversification of the portfolio;

· delegated lending authorities, which are clearly communicated to personnel engaged in the credit granting process,

a defined approval process for loans in excess of those limits and the review of larger credits by a senior management
group prior to recommendation to the Loans Committee of the Board;

· credit policies, guidelines and directives, which are communicated to all branches and officers whose activities

and responsibilities include credit granting and risk assessment;

· appointment of personnel engaged in credit granting who are qualified, experienced bankers;

· a standardized credit risk rating classification established for all credits and reviewed not less than annually;

· annual reviews of individual credit facilities (except consumer loans and single-unit residential mortgages);

· quarterly review of risk diversification by geographic area, industry sector and product measured against assigned

portfolio limits;

· pricing of credits commensurate with risk to ensure an appropriate financial return;

· management of growth within quality objectives;

· early recognition of problem accounts and immediate implementation of steps to protect the safety of Bank funds;

independent reviews of credit valuation, risk classification and credit management procedures by the internal audit group,
which includes reporting the results to senior management, the CEO and the Audit Committee;

· detailed quarterly reviews of accounts rated less than satisfactory, including establishment of an action plan

for each account; and,

· completion of a watch list report recording accounts with evidence of weakness and an impaired loan report covering

loans that show impairment to the point where a loss is possible.

Environmental Risk

The operations of the Bank do not have a material effect on the environment. However, a risk of default may occur if a borrower is
unable to repay loans due to environmental cleanup costs. The Bank, in certain situations, may become directly liable for cleanup
costs when it is deemed to have taken control or ownership of a contaminated property. Risk assessment criteria and procedures are
in place to manage environmental risks and these are communicated to lending personnel. Reports on environmental inspections
and findings are reviewed by senior management and reported upon quarterly to the Board.

Portfolio Quality

The Bank’s strategy is to maintain a quality portfolio. Efforts are directed toward achieving a wide diversification, engaging
experienced personnel who provide a hands-on approach in credit granting, account management and quick action when
problems develop. The lending focus is primarily directed to small- and medium-sized businesses with operations conducted in
the four western provinces and to individuals. Relationship banking and “know your customer” are important tenets of account
management. An appropriate financial return on the level of risk is fundamental.

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CWB Group 2010 Annual Report 69

liQuiDity risk
Liquidity risk relates to financial liabilities that are settled by delivering cash or another financial asset. This risk arises from
fluctuations in cash flows from lending, deposit taking, investing and other activities. Effective liquidity management ensures that
adequate cash is available to honour all cash outflow obligations while limiting the opportunity cost of holding short-term assets.
Maintenance of a prudent liquidity base also provides flexibility to fund loan growth and react to other market opportunities.

Liquidity policies include:

· measurement and forecast of cash flows;

· maintenance of a pool of high quality liquid assets;

· a stable base of core deposits from retail and commercial customers;

limits on single deposits and sources of deposits;

· scenario testing in the operating, micro, and macro environments;

· diversification of funding sources; and

· an approved contingency plan.

Key features of liquidity management are:

· daily monitoring of expected cash inflows and outflows;

· tracking and forecasting the liquidity position, including the flows from off-balance sheet items, on a forward four-month

rolling basis;

· consideration of the term structure of assets and liabilities, with emphasis on deposit maturities, as well as expected loan

fundings and other commitments to provide funds when determining required levels of liquidity; and,

· separate management of the liquidity position of each regulated entity to ensure compliance with regulatory guidelines.

Subsequent to October 31, 2010, DBRS Limited issued credit ratings on the Bank’s senior debt (deposits) and subordinated
debentures of “A (low)” and “BBB (high)”, respectively, both with a stable outlook. Credit ratings do not comment on market
price or suitability of any financial instrument for a particular investor and are not recommendations to purchase, sell or hold
securities. Ratings are subject to revision or withdrawal at any time by the rating organization. Management believes the rating
will help increase the breadth of clients and investors who can participate in CWB’s deposit and debt offerings while also lowering
the Bank’s overall cost of capital.

Market risk
Market risk is the impact on earnings resulting from changes in financial market variables such as interest rates and foreign
exchange rates. Market risk arises when making loans, taking deposits and making investments. CWB itself does not undertake
trading activities and, therefore, does not have risks related to such activities as market making, arbitrage or proprietary trading.
CWB’s material market risks are confined to interest rates and foreign exchange as discussed below.

Interest Rate Risk

Interest rate risk, or sensitivity, is defined as the impact on net interest income, both current and future, resulting from a change
in market interest rates. This risk and potential variability in earnings arises primarily when cash flows associated with interest
sensitive assets and liabilities have different repricing dates. The differentials, or interest rate gaps, arise as a result of the financial
intermediation process and reflect differences in term preferences on the part of borrowers and depositors.

A positive interest rate gap exists when interest sensitive assets exceed interest sensitive liabilities for a specific maturity or
repricing period. Generally, a positive gap will result in an increase in net interest income when market interest rates rise since
assets reprice earlier than liabilities. The opposite impact will generally occur when market interest rates fall. However, the
directness of the correlation may be disrupted when interest rates approach zero.

CWB’s earnings are affected by the monetary policies of the Bank of Canada. Monetary policy decisions have an impact on the
level of interest rates, which can have an impact on earnings.

To manage interest rate risk arising as a result of the financial intermediation process, ALCO establishes policy guidelines for
interest rate gap positions and meets regularly to monitor the Bank’s position and decide future strategy. The objective is to
manage the interest rate risk within prudent guidelines. Interest rate risk policies are approved and reviewed at least annually by
the Board of Directors, with quarterly reporting provided to the Board as to the gap position.

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CWB Group 2010 Annual Report

Exposure to interest rate risk is controlled by managing the size of the static gap positions between interest sensitive assets and
interest sensitive liabilities for future periods. Gap analysis is supplemented by computer simulation of the asset liability portfolio
structure, duration analysis and dollar estimates of net interest income sensitivity for periods of up to one year. The interest rate
gap is measured at least monthly. Note 29 to the consolidated financial statements shows the gap position at October 31, 2010 for
select time intervals.

The gap analysis in Note 29 is a static measurement of interest rate sensitive gaps at a specific time. These gaps can change
significantly in a short period of time. The impact of changes in market interest rates on earnings will depend upon the magnitude
and rate of change in interest rates, as well as the size and maturity structure of the cumulative interest rate gap position and
management of those positions over time.

During the year, the one-year and under cumulative gap decreased to 1.5% from 1.8% at October 31, 2009, while the one-month
and under gap increased to 7.8% from 4.1% a year earlier. To the extent possible within the Bank’s acceptable parameters for
risk, the asset/liability position will continue to be managed such that changing interest rates would generally be neutral to net
interest income.

Interest sensitive assets matched against interest sensitive liabilities are managed on a relatively risk neutral duration basis.
Non-interest rate sensitive assets, liabilities and shareholders’ equity are typically managed at a target duration of between
two and three years.

Of the $3,887 million in fixed term deposit liabilities maturing within one year from October 31, 2010, approximately $2,919
million (27% of total deposit liabilities) mature by April 30, 2011. The term in which maturing deposits are retained will have
an impact on the future asset liability structure and, hence, interest rate sensitivity. Approximately $319 million of the fixed term
deposit liabilities maturing within one month are deposits redeemable at any time.

The estimated sensitivity of net interest income to a change in interest rates is presented in Table 28. The amounts represent
the estimated change in net interest income over the time period shown resulting from a one percentage point change in interest
rates. The estimates are based on a number of assumptions and factors, which include:

· a constant structure in the interest sensitive asset liability portfolio;

floor levels for various deposit liabilities;

interest rate changes affecting interest sensitive assets and liabilities by proportionally the same amount and applied at the
appropriate repricing dates; and,

· no early redemptions.

At October 31, 2010, a 1% increase in interest rates would increase net interest income by 2.3% over the following 12 months;
this compares to October 31, 2009 when a 1% increase in interest rates would have decreased net interest income by 2.5% over
the following 12 months. At October 31, 2010, a 1% decrease in interest rates would decrease net interest income by 1.5% over
the following 12 months; this compares to October 31, 2009 when a 1% decrease in interest rates would have increased net
interest income by 3.8% over the following 12 months.

Table 28 – eSTimaTed SenSiTiviTy oF neT inTereST income aS a reSulT oF one PercenTage PoinT change in inTereST raTeS
($ thousands)

Impact of 1% increase in interest rates

Period

90 days

1 year

1 year percentage change

Impact of 1% decrease in interest rates

Period

90 days

1 year

1 year percentage change

2010

2009

2,378

(1,394)

7,372

2.3%

(6,574)

(2.5)%

2010

2009

(1,694)

2,394

(4,703)

(1.5)%

10,241

3.8%

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CWB Group 2010 Annual Report 71

Based on the current interest rate gap position, it is estimated that a 1% increase in all interest rates would decrease annual other
comprehensive income by $9.8 million, net of tax (2009 – $21.4 million). A one-percentage point decrease in all interest rates
would increase annual other comprehensive income by a similar amount.

It is management’s intention to continue to manage the asset liability structure and interest rate sensitivity through pricing and product
policies to attract appropriate assets and liabilities, as well as through the use of interest rate swaps or other appropriate hedging
techniques (see discussion under Derivative Financial Instruments on page 57). Assets and liabilities having a term to maturity in excess
of five years are subject to specific review and control and, with the exception of subordinated debentures and the deposit from CWB
Capital Trust, were not material. The subordinated debentures, which are typically redeemed (subject to OSFI approval) after five years,
and the deposit from CWB Capital Trust are discussed in Notes 15 and 18 to the consolidated financial statements.

Foreign Exchange Risk

Foreign exchange risk arises when there is a difference between assets and liabilities denominated in a foreign currency. In
providing financial services to its customers, the Bank has assets and liabilities denominated in U.S. dollars. At October 31,
2010, assets denominated in U.S. dollars were 1.6% (2009 – 1.4%) of total assets and U.S. dollar liabilities were 1.6% (2009
– 1.4%) of total liabilities. Currencies other than U.S. dollars are not bought or sold other than to meet specific customer
needs and, therefore, the Bank has virtually no exposure to currencies other than U.S. dollars.

Policies have been established that include limits on the maximum allowable differences between U.S. dollar assets and
liabilities. The difference is measured daily and managed by use of U.S. dollar forward contracts or other means. Policy
respecting foreign exchange exposure is reviewed and approved at least annually by the Board of Directors, and deviations
from policy are reported to the Board and ALCO.

insurance risk
The Bank is exposed to insurance risk through its wholly owned subsidiary, CDI, which offers home and auto insurance to customers
in BC and Alberta. Accordingly, CDI’s operations are subject to the elements of risk associated with these lines of business, which
can cause fluctuations and uncertainties in earnings. These elements include cyclical patterns in the industry and unpredictable
developments, including weather-related and other natural catastrophes. CDI carries reinsurance coverage as part of its strategy to
manage these risks. The industry is also impacted by political, regulatory, legal and economic influences. The insurance business
involves various types of insurance related risk; in particular, underwriting risk, pricing risk, claims risk, reinsurance risk and
regulatory risk. Policies and procedures have been established to manage insurance related risk, as well as other categories of risk
to which CDI is exposed. CDI’s Board of Directors, is responsible for reviewing and approving key policies and implementing
reporting requirements to monitor compliance over significant areas.

Underwriting risk is the risk of financial loss due to inappropriate selection of customers and is reduced through controls built
into CDI’s rating and underwriting system. These controls include eligibility audits and a review by senior staff of exceptions.
Pricing risk is the risk that products may be inappropriately priced due to actual experience not matching the assumptions
made at the time pricing is determined. This is mitigated by regular underwriting reviews of product rate adequacy. Regulatory
intervention may also impact rate adequacy.

Claims risk includes the risk of financial loss due to adverse deviation in the amount, frequency or timing of claims. Policies and
procedures are in place to ensure that trained staff handle claims. However, the process for establishing the provision for unpaid
claims may reflect significant judgment and uncertainty, especially with respect to liability claims. Factors such as inflation, claims
settlement patterns, legislative activity and litigation trends may impact the actual claims amount as the claims are adjusted over time.

The risk that CDI might be exposed to large claims or to an accumulation of claims resulting from a natural catastrophe, such as
a weather-related or seismic event, is mitigated by reinsurance treaties that protect CDI from such risks. Reinsurance risk includes
the risk that reinsurance counterparties are not financially strong and that underwriting strategies are inappropriately matched
with reinsurance programs. CDI’s reinsurance is only purchased from reinsurers meeting a certain minimum security rating
and these ratings are monitored on a regular basis. CDI’s reinsurance treaties are matched to underwriting strategies through
participation of senior underwriting staff in the process. CDI is dependent on the availability and pricing of its external reinsurance
arrangements and this availability and global markets may impact pricing. If CDI is unable to renew such arrangements at favourable
rates and to adequate limits, then CDI may need to modify its underwriting practices or commitments.

In addition, as the insurance business is heavily regulated, CDI is exposed to regulatory risk. This is evidenced by the provincial
government mandated reforms to auto insurance in Alberta. This risk is managed mainly by monitoring current developments and
by actively participating in relevant bodies and associations in order to contribute CDI’s perspective.

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CWB Group 2010 Annual Report

operational risk
Operational risk is inherent in all business activities, including banking, trust, wealth management and insurance operations and
is embedded in the processes that support other risks, like credit, liquidity and market risk. It is the potential for loss as a result
of external events, human error or inadequacy, or failure of processes, procedures or controls. Its impact can be financial loss,
loss of reputation, loss of competitive position or regulatory penalties. CWB is exposed to operational risk from internal business
activities, external threats and activities that are outsourced. While operational risk cannot be completely eliminated, proactive
operational management is a key strategy to mitigate this risk. The financial measure of operational risk is actual losses incurred.
No material losses occurred in 2010.

The Basel II framework includes capital requirements related to operational risk in the banking and trust operating segment.
Under Basel II, CWB uses the Standardized Approach for operational risk. The recently established Group Risk Management
function is responsible for the continual enhancement of the group-wide Operational Risk Framework and the evolution of CWB’s
approach to operational risk management.

Strategies to minimize and manage operational risk include:

Management:

· a knowledgeable and experienced management team that is committed to sound management and promotes a highly ethical culture;

· very clear communication of “Tone at the Top”, which supports effective risk management reporting;

· a flat organization structure with management close to their operations, which facilitates effective internal communication;

· organizational surveys on employee engagement and corporate culture;

· communication of the importance of effective risk management to all levels of staff through training and policy implementation; and

· a management team that is well versed on the Bank’s operational risk tolerance and appetite.

Framework and supporting policies:

· a mature group-wide Operational Risk Framework that encompasses a common language of risk coupled with enterprise-wide

programs and methodologies for identification, measurement, control, reporting and management of operational risk;

implementation of policies and procedural controls appropriate to address identified risks and which include segregation of duties
and built-in checks and balances;

· an annual anonymous employee survey on the control environment;

· the adoption of the COSO (Committee of Sponsoring Organizations of the Treadway Commission) for Smaller Business

framework for internal control assessment;

· recent enhancements to CWB’s fraud prevention processes and policies;

· certification of National Leasing under ISO 9001 standards for quality management and quality management systems;

· regular meetings of ALCO, CDI’s Operational Risk Committee and the risk committees of CWT and Valiant;

· regular meetings of the Operations Committee, a management committee made up of supervisory and management personnel

from all banking operational areas and chaired by a member of senior management, which is responsible for the development and
recommendation of policies and procedures regarding day-to-day, routine banking operations;

· established “whistleblower” processes and employee codes of conduct;

· operational risk assessments conducted by business managers closest to the identified risks, that are annually reviewed and

reported to ALCO and the Board ;

· regular internal audits for compliance and the effectiveness of procedural controls by a strong, independent internal audit team;

· centralized reporting of operating losses to senior management and the Board;

· maintenance of a group-wide outsourcing risk management program;

· continual assessment and benchmarking of the amount and type of business insurance to ensure it is providing the coverage required;

· use of technology via automated systems with built-in controls;

· an effective change management process supported by a Project Steering Committee;

· continual review and upgrade of systems and procedures; and,

· continual updating and testing of procedures and contingency plans for disaster recovery and business continuity (including

pandemic planning).

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CWB Group 2010 Annual Report 73

In addition, the external auditors provide management and the Audit Committee with any recommendations for
improvements to internal controls or procedures identified during their annual examination of the consolidated financial
statements. CWB also maintains appropriate insurance coverage through a financial institution bond policy.

general business anD econoMic conDitions
CWB primarily operates in Western Canada. As a result, its earnings are impacted by the general business and economic
conditions of the four western provinces. The conditions include short-term and long-term interest rates, resource
commodity prices, inflation, exchange rates, consumer, business and government spending, fluctuations in debt and capital
markets, as well as the strength of the economies in which CWB and its customers operate.

level of coMpetition
CWB’s performance is impacted by the level of competition in the markets in which it operates. Each of CWB’s businesses
operates in highly competitive markets. Customer retention may be influenced by many factors, including relative service
levels, the prices and attributes of products and services, changes in products and services, and actions taken by competitors.

regulatory anD legal risk
The businesses operated by CWB and its subsidiaries are highly regulated through laws and regulations that have been
put in place by various federal and provincial governments and regulators. Changes to laws and regulations, including
changes in their interpretation or implementation, could adversely affect CWB. CWB’s failure to comply with applicable
laws, regulations, industry codes or regulatory expectations could result in sanctions, financial penalties and costs associated
with litigation that could adversely impact its earnings and damage its reputation. Although it is not possible to completely
eliminate regulatory and legal risk, CWB takes what it believes to be reasonable and prudent measures designed to ensure
compliance with governing laws and regulations including its legislative compliance framework.

accuracy anD coMpleteness of inforMation on custoMers anD counterparties
CWB depends on the accuracy and completeness of information about customers and counterparties. In deciding whether to
extend credit or enter into other transactions with customers and counterparties, CWB may rely on information furnished by
them, including financial statements, appraisals and other financial information. CWB may also rely on the representations
of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial
statements, on the reports of auditors. CWB’s financial condition and earnings could be negatively impacted to the extent it
relies on financial statements that do not comply with GAAP, that are materially misleading, or that do not fairly present, in
all material respects, the financial condition and results of operations of the customer or counterparties.

ability to execute growth initiatives
As part of its long-term corporate strategy, CWB intends to continue growing its business through a combination of organic
growth and strategic acquisitions. The ability to successfully grow its business will be dependent on a number of factors,
including identification of accretive new business or acquisition opportunities, negotiation of purchase agreements on
satisfactory terms and prices, approval of acquisitions by regulatory authorities, securing satisfactory regulatory capital and
financing arrangements and integration of newly acquired operations into the existing business. All of these activities may be
more difficult to implement or may take longer to execute than management anticipates. Further, any significant expansion
of the business may increase the operating complexity and divert management’s attention away from established or ongoing
business activities. Any failure to manage acquisition strategies successfully could have a material adverse impact on CWB’s
business, financial condition and results of operations.

inforMation systeMs anD technology
CWB and its subsidiaries’ businesses are highly dependent upon information technology systems. Third parties provide
key components of infrastructure, such as Internet connections and access to external networks. Disruptions in the Bank’s
information technology systems, whether through internal or external factors, as well as disruptions in Internet, network
access or other voice or data communication services provided by these third parties could adversely affect CWB’s ability to
deliver products and services to customers and otherwise conduct business.

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CWB Group 2010 Annual Report

reputation risk
Reputation risk is the risk to earnings and capital from negative public opinion. Negative public opinion can result from
actual or alleged conduct in any number of activities, but often involves questions about business ethics and integrity,
competence, corporate governance practices, quality and accuracy of financial reporting disclosures, or quality of
products and service. Negative public opinion could adversely affect the ability to keep and attract customers and could
expose CWB to litigation or regulatory action.

other factors
CWB cautions that the above discussion of risk factors is not exhaustive. Other factors beyond CWB’s control that may
affect future results include changes in tax laws, technological changes, unexpected changes in consumer spending and
saving habits, timely development and introduction of new products, and the anticipation of and success in managing
the associated risks.

UPDATED ShARE INFORmATION
As at December 2, 2010, there were 66,651,694 common shares outstanding. Also outstanding were employee stock
options, which are or will be exercisable for up to 3,793,077 common shares for maximum proceeds of $75.5 million
and 13,471,611 warrants that are each exercisable until March 3, 2014 to purchase one common share in the Bank at a
price of $14.00.

On December 6, 2010, the Board of Directors declared a quarterly cash dividend of $0.13 per common share payable
on January 13, 2011 to shareholders of record on December 30, 2010. The Board of Directors also declared a cash
dividend of $0.453125 per Series 3 Preferred Share payable on January 31, 2011 to shareholders of record on January
21, 2011.

cONTROLS AND PROcEDURES
As of October 31, 2010, an evaluation was carried out of the effectiveness of the Bank’s disclosure controls and
procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer will certify that the
design and operating effectiveness of those disclosure controls and procedures were effective.

Also at October 31, 2010, an evaluation was carried out of the effectiveness of internal controls over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting and financial statement compliance with
GAAP. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer will certify that the design
and operating effectiveness of internal controls over financial reporting were effective.

The Bank’s certifying officers have limited the scope of the design and operating effectiveness of disclosure controls
and procedures and internal control over financial reporting to exclude the controls, policies and procedures of
National Leasing, acquired in the second quarter of 2010. This limitation will be removed no later than January 31,
2011.

These evaluations were conducted in accordance with the standards of COSO for Smaller Business, a recognized
control model, and the requirements of Multilateral Instrument 52-109 of the Canadian Securities Administrators. A
Disclosure Committee, comprised of members of senior management, assists the Chief Executive Officer and Chief
Financial Officer in their responsibilities. Management’s evaluation of controls can only provide reasonable, not
absolute assurance that all control issues that may result in material misstatement, if any, have been detected.

There were no changes in the Bank’s internal controls over financial reporting that occurred during the year ended
October 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control
over financial reporting.

This Management’s Discussion and Analysis is dated December 6, 2010.

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CWB Group 2010 Annual Report 75

financial stateMents

mANAGEmENT’S RESPONSIBILITY FOR FINANcIAL REPORTING
The consolidated financial statements of Canadian Western Bank and related financial information presented in this annual
report have been prepared by management, who are responsible for the integrity and fair presentation of the information
presented, which includes the consolidated financial statements, Management’s Discussion and Analysis (MD&A) and other
information. The consolidated financial statements were prepared in accordance with Canadian generally accepted accounting
principles, including the requirements of the Bank Act and related rules and regulations issued by the Office of the
Superintendent of Financial Institutions Canada. The MD&A has been prepared in accordance with the requirements
of securities regulators, including National Instrument 51-102 of the Canadian Securities Administrators (CSA).

The consolidated financial statements, MD&A and related financial information reflect amounts which must, of necessity,
be based on informed estimates and judgments of management with appropriate consideration to materiality. The financial
information represented elsewhere in this annual report is fairly presented and consistent with that in the consolidated
financial statements.

Management has designed the accounting system and related internal controls, and supporting procedures are maintained to provide
reasonable assurance that financial records are complete and accurate, assets are safeguarded and the Bank is in compliance with all
regulatory requirements. These supporting procedures include the careful selection and training of qualified staff, defined division
of responsibilities and accountability for performance, and the written communication of policies and guidelines of business
conduct and risk management throughout the Bank.

We, as the Bank’s Chief Executive Officer and Chief Financial Officer, will certify Canadian Western Bank’s annual filings with
the CSA as required by Multilateral Instrument 52-109 (Certification of Disclosure in Issuers’ Annual and Interim Filings).

The system of internal controls is also supported by our internal audit department, which carries out periodic inspections of all aspects
of the Bank’s operations. The Chief Internal Auditor has full and free access to the Audit Committee and to the external auditors.

The Audit Committee, appointed by the Board of Directors, is comprised entirely of independent directors who are not officers
or employees of the Bank. The Committee is responsible for reviewing the financial statements and annual report, including
the MD&A and recommending them to the Board of Directors for approval. Other key responsibilities of the Audit Committee
include meeting with management, the Chief Internal Auditor and the external auditors to discuss the effectiveness of certain
internal controls over the financial reporting process and the planning and results of the external audit. The Committee also
meets regularly with the Chief Internal Auditor and the external auditors without management present.

The Governance Committee, appointed by the Board of Directors, is composed of directors who are not officers or employees
of the Bank. Their responsibilities include reviewing related party transactions and reporting to the Board of Directors those
transactions which may have a material impact on the Bank.

The Office of the Superintendent of Financial Institutions Canada, at least once a year, makes such examination and inquiry
into the affairs of the Bank and its federally regulated subsidiaries as is deemed necessary or expedient to satisfy themselves that
the provisions of the relevant Acts, having reference to the safety of the depositors and policyholders, are being duly observed
and that the Bank is in a sound financial condition.

KPMG LLP, the independent auditors appointed by the shareholders of the Bank, have performed an audit of the consolidated
financial statements and their report follows. The external auditors have full and free access to, and meet periodically with, the
Audit Committee to discuss their audit and matters arising therefrom.

Larry M. Pollock
President and Chief Executive Officer

November 26, 2010

Tracey C. Ball, FCA, ICD.D
Executive Vice President and Chief Financial Officer

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CWB Group 2010 Annual Report

auDitors’ report

TO ThE ShAREhOLDERS OF cANADIAN wESTERN BANk
We have audited the consolidated balance sheets of Canadian Western Bank as at October 31, 2010 and 2009 and the
consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flow for the years
then ended. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position
of the Bank as at October 31, 2010 and 2009 and the results of its operations and its cash flow for the years then ended
in accordance with Canadian generally accepted accounting principles.

KPMG LLP
Chartered Accountants
Edmonton, Alberta

November 26, 2010

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CWB Group 2010 Annual Report 77

cONSOLIDATED BALANcE ShEETS
as at october 31
($ thousands)

Assets
Cash Resources

Cash and non-interest bearing deposits with financial institutions
Deposits with regulated financial institutions
Cheques and other items in transit

Securities

Issued or guaranteed by Canada
Issued or guaranteed by a province or municipality
Other securities

Securities Purchased Under Resale Agreements
Loans

Residential mortgages
Other loans

Allowance for credit losses

Other

Property and equipment
Goodwill
Intangible assets
Insurance related
Derivative related
Other assets

Total Assets

Liabilities and Shareholders’ Equity
Deposits

Payable on demand
Payable after notice
Payable on a fixed date
Deposit from Canadian Western Bank Capital Trust

Other

Cheques and other items in transit
Insurance related
Derivative related
Securities sold under repurchase agreements
Other liabilities

Subordinated Debentures

Conventional

Shareholders’ Equity
Preferred shares
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income

Total Liabilities and Shareholders’ Equity
Contingent Liabilities and Commitments

2010

2009

8,965
168,998
9,981
187,944

564,694
88,478
857,015
1,510,187
177,954

2,479,957
8,095,148
10,575,105
(78,641)
10,496,464

65,978
37,723
43,420
59,652
134
122,235
329,142
12,701,691

530,608
2,999,599
7,177,560
105,000
10,812,767

39,628
149,396
992
–
235,865
425,881

315,000

209,750
279,352
21,291
614,710
22,940
1,148,043
12,701,691

17,447
266,980
12,677
297,104

854,457
253,143
783,809
1,891,409
–

2,282,475
7,029,177
9,311,652
(75,459)
9,236,193

39,252
9,360
6,465
55,932
2,334
97,823
211,166
11,635,872

359,176
2,778,601
6,374,461
105,000
9,617,238

41,964
145,509
74
300,242
169,346
657,135

375,000

209,750
226,480
19,366
511,784
19,119
986,499
11,635,872

(Note 3)

(Note 4)

(Note 5)

(Note 6)

(Note 7)

(Note 9)

(Note 10)

(Note 11)
(Note 12)
(Note 13)

(Note 14)

(Note 15)

(Note 16)

(Note 12)

(Note 5)

(Note 17)

(Notes 18 and 37)

(Note 19)

(Note 21)

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CWB Group 2010 Annual Report

Allan W. Jackson
Chairman

Larry M. Pollock
President and Chief Executive Officer

cONSOLIDATED STATEmENTS OF INcOmE
For the year ended october 31
($ thousands, except per share amounts)

Interest Income

Loans
Securities
Deposits with regulated financial institutions

Interest Expense

Deposits
Subordinated debentures

Net Interest Income
Provision for Credit Losses
Net Interest Income after Provision for Credit Losses
Other Income

Credit related
Insurance, net
Trust and wealth management services
Gains on sale of securities
Retail services
Securitization revenue
Foreign exchange gains
Other

Net Interest and Other Income
Non-Interest Expenses

Salaries and employee benefits
Premises and equipment
Other expenses
Provincial capital taxes

(Note 7)

(Note 22)

Net Income before Income Taxes and Non-Controlling Interest in Subsidiary
Income Taxes

(Note 25)

Non-Controlling Interest in Subsidiary
Net Income
Preferred Share Dividends
Net Income Available to Common Shareholders

Average number of common shares (in thousands)
Average number of diluted common shares (in thousands)

Earnings Per Common Share

Basic
Diluted

(Note 26)

2010

511,274
40,785
5,528
557,587

222,356
17,753
240,109
317,478
20,413
297,065

31,550
21,716
17,316
12,447
9,017
4,285
2,422
6,842
105,595
402,660

123,972
31,448
34,511
1,549
191,480
211,180
47,344
163,836
215
163,621
15,208
148,413
65,757
72,329

2.26
2.05

2009

455,413
44,209
12,803
512,425

263,017
20,901
283,918
228,507
13,500
215,007

23,369
17,116
15,478
25,225
7,403
–
2,745
276
91,612
306,619

104,105
26,030
26,115
1,932
158,182
148,437
41,920
106,517
232
106,285
10,062
96,223
63,613
65,335

1.51
1.47

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CWB Group 2010 Annual Report 79

cONSOLIDATED STATEmENTS OF chANGES IN ShAREhOLDERS’ EQUITY
For the year ended october 31
($ thousands)

Retained Earnings
Balance at beginning of year

Net income
Dividends - Preferred shares
- Common shares

Warrants purchased under normal course issuer bid
Issuance costs on common shares
Issuance costs on preferred units

Balance at end of year

Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year

Other comprehensive income

Balance at end of year
Total retained earnings and accumulated other comprehensive income
Preferred Shares
Balance at beginning of year

Issued

Balance at end of year
Common Shares
Balance at beginning of year

Issued on acquisition of subsidiary
Issued on exercise of options
Transferred from contributed surplus on the exercise or exchange of options
Issued under dividend reinvestment plan
Issued on exercise of warrants

Balance at end of year

Contributed Surplus
Balance at beginning of year

(Note 19)

(Note 34)

Amortization of fair value of options
Transferred to capital stock on the exercise or exchange of options

(Note 20)

Balance at end of year

Total Shareholders’ Equity

cONSOLIDATED STATEmENTS OF cOmPREhENSIvE INcOmE
For the year ended october 31
($ thousands)

Net Income
Other Comprehensive Income, net of tax
Available-for-sale securities

Gains from change in fair value(1)
Reclassification to other income(2)

Derivatives designated as cash flow hedges

Gains from change in fair value(3)
Reclassification to net interest income(4)
Reclassification to other liabilities for derivatives terminated prior to maturity(5)

2010

511,784
163,621
(15,208)
(28,929)
(16,453)
(105)
–
614,710

19,119
3,821
22,940
637,650

209,750
–
209,750

226,480
42,582
3,864
3,181
2,922
323
279,352

19,366
5,106
(3,181)
21,291
1,148,043

2009

448,203
106,285
(10,062)
(27,991)
–
–
(4,651)
511,784

(5,203)
24,322
19,119
530,903

–
209,750
209,750

221,914
–
2,200
1,613
744
9
226,480

14,234
6,745
(1,613)
19,366
986,499

2010
163,621

2009
106,285

14,285
(8,868)
5,417

17
(1,613)
–
(1,596)
3,821
167,442

47,214
(17,556)
29,658

9,453
(9,379)
(5,410)
(5,336)
24,322
130,607

Comprehensive Income for the Year

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CWB Group 2010 Annual Report

(1) Net of income tax expense of $5,647 (2009 – $20,094).
(2) Net of income tax benefit of $3,579 (2009 – $7,669).
(3) Net of income tax expense of $7 (2009 – $4,066).

(4) Net of income tax benefit of $672 (2009 – $4,035).
(5) Net of income tax benefit of nil (2009 – $2,264).

cONSOLIDATED STATEmENTS OF cASh FLOw
For the year ended october 31
($ thousands)

Cash Flows from Operating Activities

Net income

Adjustments to determine net cash flows:

Provision for credit losses

Depreciation and amortization

Amortization of fair value of employee stock options

Future income taxes, net

Gain on sale of securities, net

Accrued interest receivable and payable, net

Current income taxes payable, net

Other items, net

Cash Flows from Financing Activities

Deposits, net

Common shares issued

Securities sold under repurchase agreements, net

Long-term debt repaid

Debentures redeemed

Dividends

Warrants purchased under normal course issuer bid

Issuance costs on share capital

Preferred units issued

Cash Flows from Investing Activities

Interest bearing deposits with regulated financial institutions, net

Securities, purchased

Securities, sales proceeds

Securities, matured

Securities purchased under resale agreements, net

Loans, net

Property and equipment

Acquisition of subsidiaries

Change in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year *

*Represented by:

Cash and non-interest bearing deposits with financial institutions

Cheques and other items in transit (included in Cash Resources)

Cheques and other items in transit (included in Other Liabilities)

Cash and Cash Equivalents at End of Year

Supplemental Disclosure of Cash Flow Information

Amount of interest paid in the year

Amount of income taxes paid in the year

(Note 19)

(Note 34)

(Note 18)

(Note 19)

2010

2009

163,621

106,285

20,413

13,816

5,107

556

(12,447)

(4,012)

(2,164)

41,148

226,038

1,195,528

7,109

(300,242)

(270,630)

(60,000)

(44,137)

(16,453)

(105)

–

511,070

95,168

(2,966,470)

2,717,950

617,444

(177,954)

(957,478)

(21,079)

(53,531)

(745,950)

(8,842)

(11,840)

(20,682)

8,965

9,981

(39,628)

(20,682)

251,739

48,953

13,500

8,773

6,745

(13,633)

(25,225)

1,032

11,694

5,595

114,766

371,519

2,953

300,242

–

(38,053)

–

(4,651)

209,750

841,760

203,663

(3,253,024)

2,302,967

348,998

77,000

(625,624)

(14,809)

(6,481)

(967,310)

(10,784)

(1,056)

(11,840)

17,447

12,677

(41,964)

(11,840)

275,943

44,198

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CWB Group 2010 Annual Report 81

NOTES TO cONSOLIDATED FINANcIAL STATEmENTS
For the years ended october 31, 2010 and 2009
($ thousands, except per share amounts)

1. BAsis of PresentAtion

These consolidated financial statements of Canadian Western Bank (CWB or the Bank) have been prepared in accordance
with subsection 308 (4) of the Bank Act, which states that, except as otherwise specified by the Office of the Superintendent
of Financial Institutions Canada (OSFI), the financial statements are to be prepared in accordance with Canadian generally
accepted accounting principles (GAAP). The significant accounting policies used in the preparation of these financial
statements, including the accounting requirements of OSFI, are summarized below and in the following notes. These
accounting policies conform, in all material respects, to Canadian GAAP.

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as
at the date of the financial statements as well as the reported amount of revenues and expenses during the year. Key areas
of estimation where management has made subjective judgments, often as a result of matters that are inherently uncertain,
include those relating to the allowance for credit losses, fair value of financial instruments, goodwill and intangible assets,
provision for unpaid claims and adjustment expenses, future income tax asset and liability, other than temporary impairment of
securities and fair value of employee stock options. Therefore, actual results could differ from these estimates.

a) Basis of Consolidation

The consolidated financial statements include the assets, liabilities and results of operations of the Bank and all of its
subsidiaries, after the elimination of intercompany transactions and balances. Subsidiaries are defined as entities whose
operations are controlled by the Bank and are corporations in which the Bank is the beneficial owner. See Note 35 for details
of the subsidiaries and affiliate.

b) Business Combinations

Business acquisitions are accounted for using the purchase method.

c) Translation of Foreign Currencies

Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates prevailing at the balance
sheet date. Revenues and expenses in foreign currencies are translated at the average exchange rates prevailing during the year.
Realized and unrealized gains and losses on foreign currency positions are included in other income, except for unrealized
foreign exchange gains and losses on available-for-sale securities that are included in other comprehensive income.

d) Specific Accounting Policies

To facilitate a better understanding of the Bank’s consolidated financial statements, the significant accounting policies are
disclosed in the notes, where applicable, with related financial disclosures by major caption:

Note Topic

2
3
4
5

6
7
8
9
10
11
12
13
14
15
16
17
18

Financial instruments
Cash resources
Securities
Securities purchased under resale agreements
and securities sold under repurchase agreements
Loans
Allowance for credit losses
Securitization
Property and equipment
Goodwill and intangible assets
Insurance related other assets
Derivative financial instruments
Other assets
Deposits
Capital trust securities
Insurance related other liabilities
Other liabilities
Subordinated debentures

Note Topic
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37

Capital stock
Stock based compensation
Contingent liabilities and commitments
Insurance operations
Disclosures on rate regulation
Employee future benefits
Income taxes
Earnings per common share
Assets under administration and management
Related party transactions
Interest rate sensitivity
Fair value of financial instruments
Risk management
Capital management
Segmented information
Acquisition of subsidiary
Subsidiaries and affiliate
Comparative figures
Subsequent events

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CWB Group 2010 Annual Report

e) Future Accounting Changes

International Financial Reporting Standards

The Canadian Institute of Chartered Accountants (CICA) will transition Canadian GAAP for publicly accountable entities to
International Financial Reporting Standards (IFRS). The Bank’s consolidated financial statements will be prepared in accordance
with IFRS for the fiscal year commencing November 1, 2011 and will include IFRS comparative information for the prior year.

The Bank has a four stage project underway to identify and evaluate the impact of the transition to IFRS on the consolidated
financial statements and complete the transition. The project plan includes the following phases – diagnostic, design and
planning, solution development, and implementation. The diagnostic, and design and planning phases are complete, and the
solution development phase is substantially complete.

The quantitative impact of the transition to IFRS on the Bank’s consolidated financial statements for current standards has not
yet been determined. However, the policy differences identified include loan loss accounting, derecognition, the consolidation
of variable interest entities, and contingent consideration as a result of a business combination. CWB continues to monitor the
International Accounting Standards Board’s proposed changes to standards during Canada’s transition to IFRS. These proposed
changes may have a significant impact on the Bank’s implementation plan and future financial statements.

finAnciAl instruments

As a financial institution, most of the Bank’s balance sheet is comprised of financial instruments and the majority of net income
results from gains, losses, income and expenses related to the same.

The use of financial instruments exposes the Bank to credit, liquidity and market risk. A discussion of how these are managed can
be found in the Risk Management section of the 2010 Annual Report beginning on page 68.

Income and expenses are classified as to source, either securities or loans for income, and deposits or subordinated debentures for
expense. Gains on the sale of securities, net, and fair value changes in certain derivatives are classified to other income.

3. cAsh resources

Cash resources have been designated as available-for-sale and are reported on the consolidated balance sheets at fair value with
changes in fair value recorded in other comprehensive income, net of income taxes.

Included in deposits with regulated financial institutions are available-for-sale financial instruments reported on the consolidated
balance sheets at the fair value of $168,998 (2009 – $266,980), which is $2,104 (2009 – $7,390) higher than amortized cost.

4. securities

Securities have been designated as available-for-sale, are accounted for at settlement date and recorded on the consolidated
balance sheets at fair value with changes in fair value recorded in other comprehensive income, net of income taxes.

Securities are purchased with the original intention to hold the instrument to maturity or until market conditions render
alternative investments more attractive. If an impairment in value is other than temporary, any write-down to net realizable
value is reported in the consolidated statements of income. Gains and losses realized on disposal of securities and adjustments
to record any other than temporary impairment in value are included in other income. Amortization of premiums and discounts
are reported in interest income from securities in the consolidated statements of income.

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CWB Group 2010 Annual Report 83

The analysis of securities at carrying value, by type and maturity, is as follows:

Securities issued or guaranteed by

Canada
A province or municipality

Other debt securities
Equity securities

Preferred shares
Common shares

Total

Within
1 Year

Maturities
1 to
3 Years

3 to
5 Years

Over 5
Years

2010
Total
Carrying
Value

493,727
69,454
98,351

70,967
15,073
127,556

–
2,326
19,013

–
1,625
11,624

564,694
88,478
256,544

2009
Total
Carrying
Value

854,457
253,143
332,592

26,266
–
687,798

86,011
–
299,607

383,773
–
405,112

15,178
89,243
117,670

511,228
89,243
1,510,187

434,361
16,856
1,891,409

The analysis of unrealized gains and losses on securities reflected on the balance sheet is as follows:

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value

2010

2009

Securities issued or
guaranteed by
Canada
A province or
municipality

Other debt securities
Equity securities

Preferred shares
Common shares

Total

564,833 $

69 $

208 $

564,694 $

852,863 $

1,602 $

8 $

854,457

87,755
253,132

737
3,493

14
81

88,478
256,544

250,596
325,694

2,682
7,279

135
381

253,143
332,592

492,897
81,574
$ 1,480,191 $

20,614
9,305
34,218 $

2,283
1,636
4,222 $ 1,510,187 $ 1,874,002 $

511,228
89,243

428,551
16,298

14,108
1,244
26,915 $

8,298
686

434,361
16,856
9,508 $ 1,891,409

The securities portfolio is primarily comprised of high quality debt instruments, preferred shares and common shares that are not
held for trading purposes and, where applicable, are typically held until maturity. Fluctuations in value are generally attributed to
changes in interest rates, market spreads and shifts in the interest rate curve. Unrealized losses at year end are considered to be
temporary in nature.

5. securities PurchAsed under resAle Agreements And securities sold under rePurchAse Agreements

Securities purchased under resale agreements represent a purchase of Government of Canada securities by the Bank effected with
a simultaneous agreement to sell them back at a specified price on a future date, which is generally short term. The difference
between the cost of the purchase and the predetermined proceeds to be received on a resale agreement is recorded as securities
interest income.

Securities sold under repurchase agreements represent a sale of Government of Canada securities by the Bank effected with a
simultaneous agreement to buy them back at a specified price on a future date, which is generally short term. The difference
between the proceeds of the sale and the predetermined cost to be paid on a resale agreement is recorded as deposit interest
expense.

Securities purchased under resale agreements have been designated as available-for-sale and are reported on the consolidated
balance sheets at fair value with changes in fair value reported in other comprehensive income, net of income taxes.

Interest earned or paid is recorded in interest income or expense as earned.

loAns

Loans, including leases, are recorded at amortized cost and are stated net of unearned income, unamortized premiums
and an allowance for credit losses (Note 7).

Interest income is recorded using the effective interest method, except for loans classified as impaired. Loans are determined
to be impaired when payments are contractually past due 90 days, or where the Bank has taken realization proceedings,
or where the Bank is of the opinion that the loan should be regarded as impaired. An exception may be made where management
determines that the loan is well secured and in the process of collection and the collection efforts are reasonably expected to result

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CWB Group 2010 Annual Report

in either repayment of the loan or restoring it to current status within 180 days from the date the payment went in arrears.
All loans are classified as impaired when a payment is 180 days in arrears other than loans guaranteed or insured for both principal
and interest by the Canadian government, the provinces or a Canadian government agency. These loans are classified as impaired
when payment is 365 days in arrears.

Impairment is measured as the difference between the carrying value of the loan at the time it is classified as impaired and the
present value of the expected cash flows (estimated realizable amount), using the interest rate inherent in the loan at the date the
loan is classified as impaired. When the amounts and timing of future cash flows cannot be reliably estimated, either the fair value
of the security underlying the loan, net of any expected realization costs, or the current market price for the loan may be used to
measure the estimated realizable amount. At the time a loan is classified as impaired, interest income will cease to be recognized
in accordance with the loan agreement, and any uncollected but accrued interest will be added to the carrying value of the loan,
together with any unamortized premiums, discounts or loan fees. Subsequent payments received on an impaired loan are recorded
as a reduction to the carrying value of the loan. Impaired loans are returned to performing status when the timely collection of
both principal and interest is reasonably assured and all delinquent principal and interest payments are brought current and all
charges for loan impairment have been reversed.

Loan fees, net of directly related costs, are amortized to interest income over the expected term of the loan. Premiums paid
on the acquisition of loan portfolios are amortized to interest income over the expected term of the loans.

Outstanding gross loans and impaired loans, net of allowances for credit losses, by loan type, are as follows:

2010

Gross
Amount
$ 1,793,181 $
4,124,235
1,943,716
2,713,973
$ 10,575,105 $

Gross
Impaired
Amount

Specific
Allowance

24,534 $
82,799
27,918
7,956
143,207 $

1,288 $
4,880
10,215
2,655
19,038

Gross
Amount

Net
Impaired
Loans
23,246 $ 1,452,682 $
77,919
17,703
5,301

3,909,991
1,412,344
2,536,635

124,169 $ 9,311,652 $
(59,603)

2009

Gross
Impaired
Amount

Specific
Allowance

14,805 $
76,643
26,408
20,088
137,944 $

1,207 $
5,611
6,196
1,292
14,306

Net
Impaired
Loans
13,598
71,032
20,212
18,796
123,638
(61,153)

64,566

62,485

Consumer and personal
Real estate(1)
Equipment financing
Commercial
Total(2)
General allowance(3)
Net impaired loans after

general allowance

(1) Multi-family residential mortgages are presented as real estate loans in this table.
(2) Gross impaired loans include foreclosed assets with a carrying value of $867 (2009 – nil) which are held for sale.
(3) The general allowance for credit risk is not allocated by loan type.

Outstanding impaired loans, net of allowance for credit losses, by provincial location of security, are as follows:

Alberta
British Columbia
Saskatchewan
Manitoba
Other

Total
General allowance(1)
Net impaired loans after

general allowance

Gross
Impaired
Amount

98,973
38,543
2,109
329
3,253
143,207

2010

Specific
Allowance

14,515
1,259
1,114
233
1,917
19,038

Net
Impaired
Loans

84,458
37,284
995
96
1,336
124,169
(59,603)

Gross
Impaired
Amount

74,847
37,655
1,632
337
23,473
137,944

2009

Specific
Allowance

7,651
5,000
609
23
1,023
14,306

Net
Impaired
Loans

67,196
32,655
1,023
314
22,450
123,638
(61,153)

64,566

62,485

(1) The general allowance for credit risk is not allocated by province.

During the year, interest recognized as income on impaired loans totaled $3,392 (2009 – $1,726).

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CWB Group 2010 Annual Report 85

Gross impaired loans exclude certain past due loans where payment of interest or principal is contractually in arrears, which are
not classified as impaired. Details of such past due loans that have not been included in the gross impaired amount are as follows:

As at October 31, 2010
Residential mortgages
Other loans(1)

As at October 31, 2009
Residential mortgages
Other loans

(1) Amounts exclude National Leasing.

1 - 30 days
5,762
17,877
23,639

31 - 60 days
7,933
33,938
41,871

61 - 90 days
3,912
5,731
9,643

5,002
22,531
27,533

11,102
18,170
29,272

1,828
2,866
4,694

More than
90 days
–
4
4

–
–
–

Total
17,607
57,550
75,157

17,932
43,567
61,499

The composition of the Bank’s loan portfolio by geographic region and industry sector is as follows:

October 31, 2010
($ millions)

Loans to individuals

Residential mortgages(2)

Other loans

Loans to Businesses

Commercial
Construction and real estate(3)

Equipment financing

Energy

British
Columbia

Alberta Saskatchewan

Manitoba

Other

Total(1)

Composition
Percentage

1,046

1,040

1,112

753

1,272

329

–

2,354

104

1,144

1,447

1,517

710

265

3,939

145

159

111

223

118

–

452

611

–

223

294

181

2,480

182

291

184

464

–

939

188

2,668

2,697

3,266

1,679

265

7,907

23%

1,121

10,575

100%

Total Loans

3,466

5,083

Composition Percentage

33%

48%

10%

100%

October 31, 2009
($ millions)

Loans to Individuals

Residential mortgages(2)

1,005

1,006

Other loans

Loans to Businesses

Commercial
Construction and real estate(3)

Equipment financing

Energy

Total Loans

Composition Percentage

1,067

752

1,126

324

–

2,202

102

1,108

1,258

1,361

744

158

3,521

3,269

4,629

120

135

120

154

–

324

459

2,282

–

160

321

194

125

–

640

252

703

183

2,465

2,536

2,896

1,257

158

6,847

9,312

25%

100%

35%

50%

100%

(1) This table does not include an allocation of the allowance for credit losses or deferred revenue and premiums.
(2) Includes single- and multi-unit residential mortgages and project (interim) mortgages on residential property.
(3) Includes commercial term mortgages and project (interim) mortgages for non-residential property.

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CWB Group 2010 Annual Report

7. AllowAnce for credit losses

An allowance for credit losses is maintained, which, in the Bank’s opinion, is adequate to absorb credit related losses in its loan
portfolio. The adequacy of the allowance for credit losses is reviewed at least quarterly. The allowance for credit losses is deducted
from the outstanding loan balance.

The allowance for credit losses consists of specific provisions and the general allowance for credit risk. Specific provisions include
all the accumulated provisions for losses on identified impaired loans required to reduce the carrying value of those loans to their
estimated realizable amount. The general allowance for credit risk includes provisions for losses inherent in the portfolio that
are not presently identifiable by management of the Bank on an account-by-account basis. The general allowance for credit risk
is established by taking into consideration historical trends in the loss experience during economic cycles, the current portfolio
profile, estimated losses for the current phase of the economic cycle and historical experience in the industry.

Actual write-offs, net of recoveries, are deducted from the allowance for credit losses. The provision for credit losses in the
consolidated statements of income is charged with an amount sufficient to keep the balance in the allowance for credit losses
adequate to absorb all credit related losses.

The following table shows the changes in the allowance for credit losses during the year:

Balance at beginning of year

Acquisition of subsidiary

Provision for credit losses

Write-offs

Recoveries

2010

General
Allowance
for Credit
Losses

Specific
Allowance

14,306

61,153

2,596

26,135

(24,599)

600

4,172

(5,722)

–

2009

General
Allowance
for Credit
Losses

Specific
Allowance

Total

15,011

60,527

75,538

–

12,874

(13,842)

263

–

626

–

13,500

(13,842)

263

Total

75,459

6,768

20,413

(24,599)

600

Balance at end of year

19,038

59,603

78,641

14,306

61,153

75,459

8. securitiZAtion

As a result of the acquisition of National Leasing Group Inc. (National Leasing) on February 1, 2010 (see Note 34), the Bank
participates in securitization activities. Securitization consists of the transfer of equipment leases to an independent trust or other
third party, which buys the leases and may issue securities to investors. Securitizations are accounted for as sales as the Bank
surrenders control of the transferred assets and receives consideration other than beneficial interests in the transferred assets.

When the Bank has an entitlement to participate in future cash flows, the retained interests, net of estimated servicing costs, are
classified by the Bank as available-for-sale and included in other assets. When the Bank has received the full proceeds in cash,
a reserve for estimated credit and prepayment losses and a reserve for future servicing costs are included in other liabilities. The
retained interests represent the maximum exposure to losses on the securitized assets. On a quarterly basis, the fair value of the
retained interests in securitized assets is reviewed for impairment. Fair value is subject to credit, prepayment and interest rate risks.

Gains on the sale of leases and servicing revenues are reported in other income – securitization revenue. In determining the
gain, the carrying amount of the leases sold is allocated between the assets sold and the retained interests based on their relative
fair value at the date of transfer. The Bank estimates fair value based on the present value of future expected cash flows using
management’s best estimates of the key assumptions - credit losses, prepayment speeds and discount rates commensurate with
the risks involved. There have been no securitizations since February 1, 2010.

The leases are sold on a fully serviced basis. Accordingly, upon each securitization a servicing liability is recorded to recognize the
potential reduction in cash flows receivable as if an amount was paid by the securitizor to a replacement servicer. The estimated
fees that would otherwise be payable to a replacement servicer form the basis of determination of the fair value of the servicing
liability that is charged against the gain at the time of recognition of the sale of securitized assets.

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CWB Group 2010 Annual Report 87

Cash flows received from securitization activities were as follows:

Proceeds from new securitizations

Cash flow received from retained interests

Losses reimbursed to securitizor

Early termination option payments

Total

For the nine
months ended
October 31, 2010

–

8,300

(2,520)

(13,141)

(7,361)

The following table presents information about off-balance sheet gross impaired leases and net write-offs for securitized assets
as at October 31, 2010 and are not included in Note 6 – Loans and Note 7 – Allowance for Credit Losses:

Type of Lease
Equipment financing securitization

(1) For the nine months ended October 31, 2010.

Gross
Leases

Gross
Impaired
Leases

Write-offs,
Net of
Recoveries(1)

199,097

1,143

2,306

As at October 31, 2010, key economic assumptions and the sensitivity of the current fair value (FV) of residual cash flows
to immediate 10% and 20% adverse changes in those assumptions are as follows:

Fair value of retained interests

Cash flow received from retained interests

Annual prepayment rate

Expected credit losses

Residual cash flows discount rate

Key Economic

Impact on

FV of 10%

Impact on

FV of 20%

Assumptions Adverse Change Adverse Change

6,418

8,300

7.5%

3.39%

3.78%

830

113

1,660

162

226

These sensitivities are hypothetical and should be used with caution. Changes in fair value based on a 10 or 20% variation in
assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may
not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the retained interests
is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which
might magnify or counteract the sensitivities.

9. ProPerty And eQuiPment

Land is carried at cost. Buildings, equipment and furniture, and leasehold improvements are carried at cost less accumulated
depreciation and amortization. Depreciation and amortization are calculated primarily using the straight-line method over the
estimated useful life of the asset, as follows: buildings – 20 years, equipment and furniture – three to ten years, and leasehold
improvements – term of the lease. Gains and losses on disposal are recorded in other income in the year of disposal. Land,
building and equipment, if no longer in use or considered impaired, are written down to the fair value.

Operating leases primarily comprise branch and office premises and are not capitalized. Total costs, including free rent periods
and step-rent increases, are expensed on a straight-line basis over the lease term.

Land

Buildings

Computer equipment

Office equipment and furniture

Leasehold improvements

Total

Accumulated

Depreciation and

Cost

Amortization

4,265

18,515

46,967

24,571

43,618

4,309

33,958

15,402

18,289

2010

Net Book

Value

4,265

14,206

13,009

9,169

25,329

137,936

71,958

65,978

2009

Net Book

Value

2,783

1,985

6,498

7,104

20,882

39,252

Depreciation and amortization for the year amounted to $10,033 (2009 – $7,503).

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CWB Group 2010 Annual Report

10. goodwill And intAngiBle Assets

Goodwill is the excess of the purchase price paid for the acquisition of a subsidiary over the fair value of the net assets acquired,
including identifiable intangible assets. Goodwill and other intangibles with an indefinite life are not amortized, but are subject
to a fair value impairment test at least annually. Other intangibles with a finite life are amortized to the consolidated statements
of income over their expected lives not exceeding 15 years. These intangible assets are tested for impairment whenever
circumstances indicate that the carrying amount may not be recoverable. Any impairment of goodwill or other intangible assets
will be charged to the consolidated statements of income in the period of impairment.

Goodwill

Identifiable intangible assets

Customer relationships

Non-competition agreements

Trademarks

Others

Total

Accumulated

Cost

Amortization

37,723

–

37,668

5,731

2,206

5,578

51,183

5,162

1,594

–

1,007

7,763

88,906

7,763

2010

Net Book

Value
37,723 $

2009

Net Book

Value

9,360

32,506

4,137

2,206

4,571

43,420
81,143 $

3,885

2,000

580

–

6,465

15,825

Amortization of customer relationships and other intangible assets for the year amounted to $4,067 (2009 – $1,270). The
trademarks have an indefinite life and are not subject to amortization. Goodwill includes $34,469 (2009 – $6,106) related to the
banking and trust segment and $3,254 (2009 – $3,254) related to the insurance segment. There were no writedowns of goodwill
or intangible assets due to impairment.

11.

insurAnce relAted other Assets

Instalment premiums receivable

Reinsurers’ share of unpaid claims and adjustment expenses

Deferred policy acquisition costs

Recoverable on unpaid claims

Due from reinsurers

Total

12. derivAtive finAnciAl instruments

2010

29,391

10,949

10,510

6,326

2,476

59,652

2009

27,620

10,441

9,808

7,303

760

55,932

Interest rate, foreign exchange and equity contracts such as futures, options, swaps, floors and rate locks are entered into for risk
management purposes in accordance with the Bank’s asset liability management policies. It is the Bank’s policy not to utilize
derivative financial instruments for trading or speculative purposes. Interest rate swaps and floors are primarily used to reduce the
impact of fluctuating interest rates. Equity contracts are used to economically offset the return paid to deposit products that are
linked to a stock index. Foreign exchange contracts are only used for the purposes of meeting needs of clients or day-to-day business.

The Bank designates certain derivative financial instruments as either a hedge of the fair value of recognized assets or liabilities or
firm commitments (fair value hedges), or a hedge of highly probable future cash flows attributable to a recognized asset or liability
or a forecasted transaction (cash flow hedges). On an ongoing basis, the Bank assesses whether the derivatives that are used in
hedging transactions are effective in offsetting changes in fair values or cash flows of the hedged items. If a hedging transaction
becomes ineffective or if the derivative is not designated as a cash flow hedge, any subsequent change in the fair value of the
hedging instrument is recognized in earnings. Prior to February 1, 2010, all interest rate swaps were designated as cash flow hedges.
Subsequent to February 1, 2010, with the acquisition of National Leasing (see Note 34), the Bank has interest rate swaps outstanding
that are not designated as hedges. As at October 31, 2010, all interest rate swaps designated as cash flow hedges have matured.

Certain derivatives embedded in other financial instruments, such as the return on fixed term deposits that are linked to a stock
index, are treated as separate derivatives when their economic characteristics and risk are not closely related to those of the host
contract and the combined contract is not carried at fair value. Embedded derivatives identified have been separated from the host
contract and are recorded at fair value.

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CWB Group 2010 Annual Report 89

Interest income received or interest expense paid on derivative financial instruments is accounted for on the accrual basis and
recognized as interest income or expense, as appropriate, over the term of the hedge contract. Premiums on purchased contracts
are amortized to interest expense over the term of the contract. Accrued interest receivable and payable and deferred gains
and losses for these contracts are recorded in other assets or liabilities as appropriate. Realized and unrealized gains or losses
associated with derivative instruments, which have been terminated or cease to be effective prior to maturity, are deferred
under other assets or other liabilities, as appropriate, and amortized into income over the original hedged period. In the event a
designated hedged item is terminated or eliminated prior to the termination of the related derivative instrument, any realized or
unrealized gain or loss on such derivative instrument is recognized in other income.

Derivative financial instruments are recorded on the balance sheet at fair value as either other assets or other liabilities with
changes in fair value related to the effective portion of cash flow interest rate hedges recorded in other comprehensive income,
net of income taxes. Changes in fair value related to the ineffective portion of cash flow hedges and all other derivative financial
instruments are reported in other income on the consolidated statements of income.

The Bank enters into derivative financial instruments for risk management purposes. Derivative financial instruments are financial
contracts whose value is derived from an underlying interest rate, foreign exchange rate, equity or commodity instrument or index.

Derivative financial instruments primarily used by the Bank include:

interest rate swaps, which are agreements where two counterparties exchange a series of payments based on different interest
rates applied to a notional amount;

· equity swap contracts, which are agreements where one counterparty agrees to pay or receive from the other cash flows based

on changes in the value of an equity index as well as a designated interest rate applied to a notional amount; and

foreign exchange forwards and futures, which are contractual obligations to exchange one currency for another at a specified
price for settlement at a predetermined future date.

Interest rate swaps and other instruments are used as hedging devices to control interest rate risk. The Bank enters into these
interest rate derivative instruments only for its own account and does not act as an intermediary in this market. The credit risk
is limited to the amount of any adverse change in interest rates applied on the notional contract should the counterparty default.
Equity contracts are used to offset the return paid to depositors on certain deposit products where the return is linked to a
stock index. The credit risk is limited to the average return on an equity index, applied on the notional contract amount should
the counterparty default. The principal amounts are not exchanged and, hence, are not at risk. The Asset Liability Committee
(ALCO) of the Bank establishes and monitors approved counterparties (including an assessment of credit worthiness) and
maximum notional limits. Approved counterparties are limited to rated financial institutions or their associated parent/affiliate
with a minimum rating of A high or equivalent.

Foreign exchange transactions are undertaken only for the purposes of meeting the needs of clients and of day-to-day business.
Foreign exchange markets are not speculated in by taking a trading position in currencies. Maximum exposure limits are
established and monitored by ALCO and are defined by allowable unhedged amounts. The position is managed within the
allowable target range by spot and forward transactions or other hedging techniques. Exposure to foreign exchange risk is not
material to the Bank’s overall financial position.

The following table summarizes the derivative financial instrument portfolio and the related credit risk. Notional amounts
represent the amount to which a rate or price is applied in order to calculate the exchange of cash flows. The notional amounts
are not recorded on the consolidated balance sheets. They represent the volume of outstanding transactions and do not represent
the potential gain or loss associated with the market risk or credit risk of such instruments. The replacement cost represents
the cost of replacing, at current market rates, all contracts with a positive fair value. The future credit exposure represents the
potential for future changes in value and is based on a formula prescribed by OSFI. The credit risk equivalent is the sum of
the future credit exposure and the replacement cost. The risk-weighted balance represents the credit risk equivalent weighted
according to the credit worthiness of the counterparty as prescribed by OSFI. Additional discussion of OSFI’s capital adequacy
requirements is provided within the Capital Management section of Management’s Discussion and Analysis.

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CWB Group 2010 Annual Report

Interest rate swaps

Equity contracts

Foreign exchange

contracts

Total

453

501

–

(33)

(41)

–

–
(74)

Replace-

ment

2010

Future

Credit

Risk-

Replace-

Risk Weighted

Notional

ment

2009

Future

Credit

Risk-

Risk Weighted

Cost

Exposure Equivalent

$ 47,550 $

– $

234 $

500

Balance

Amount
49 $ 235,000 $
6

2,000

Cost

Exposure Equivalent

Balance

2,265 $

– $

2,265 $

–

130

Notional

Amount

57,032

132

570

702

$ 105,082 $

134 $

834 $

968 $

2,496

181
236 $ 239,496 $

2,309 $

152 $

2,461 $

The following table shows the derivative financial instruments split between those contracts that have a positive fair value
(favourable contracts) and those that have a negative fair value (unfavourable contracts).

2010

2009

Favourable Contracts

Unfavourable Contracts

Notional

Amount

Fair

Notional

Value

Amount

Fair

Value

Favourable Contracts
Notional

Fair

Amount

Value

Unfavourable Contracts

Notional

Amount

Fair

Value

–

47,550

(930) $

– $

–

500

–

51,739

132

5,293

n/a

–
52,239

–

–
134

n/a

–
52,843

235,000

2,265

–

(59)

(3)

–

1,248

n/a

–

2,000

1,248

n/a

(992) $ 236,248 $

–
2,334 $

–
3,248 $

Interest rate swaps not

designated as hedges

Interest rate swaps designated

as cash flow hedges

Equity contracts

Foreign exchange contracts

Embedded derivatives in

equity linked deposits

Other forecasted transactions

Total

The aggregate contractual or notional amount of the derivative financial instruments on hand, the extent to which instruments
are favourable or unfavourable and, thus, the aggregate fair values of these financial assets and liabilities can fluctuate significantly
from time to time. The average fair values of the derivative financial instruments on hand during the year are set out in the
following table:

Favourable derivative financial instruments (assets)

Unfavourable derivative financial instruments (liabilities)

2010

625

1,168

2009

7,547

287

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CWB Group 2010 Annual Report 91

The following table summarizes maturities of derivative financial instruments and weighted average interest rates paid and
received on contracts.

2010

Maturity

2009

Maturity

1 Year or Less

More than 1 Year

1 Year or Less

More than 1 Year

Contractual

Notional

Amount

Interest

Notional

Interest

Rate

Amount

Rate

Notional

Amount

Interest

Notional

Interest

Rate

Amount

Rate

750

4.19% $ 46,800

2.73% $

–

500

57,032

$ 58,282

–

$ 46,800

–

235,000

3.33%

1,500

2,496

$ 238,996

–

500

–

500

–

Interest rate swaps not

designated as hedges(1)

Interest rate swaps designated

as cash flow hedges(2)

Equity contracts(3)
Foreign exchange contracts(4)

Total

(1) The Bank pays interest at a fixed contractual rate and receives interest on the one-month (30-day) Canadian Bankers’ Acceptance rate. Interest rate swaps not designated as hedges mature

between November 2010 and April 2014.

(2) The Bank pays interest at a floating rate based on the one-month (30-day) Canadian Bankers’ Acceptance rate and receives interest at a fixed rate.
(3) The Bank receives amounts based on the specified equity index and pays amounts based on the one-month (30-day) Canadian Bankers’ Acceptance rate. The remaining equity contract

matures in March 2011.

(4) The contractual interest rate is not meaningful for foreign exchange contracts. Foreign exchange contracts mature between November 2010 and July 2011.

During the year, a net unrealized after tax gain of $17 (2009 – $9,453) was recorded in other comprehensive income for changes
in fair value of the effective portion of derivatives designated as cash flow hedges and nil (2009 – nil) was recorded in other
income for changes in fair value of the ineffective portion of derivatives classified as cash flow hedges. Amounts accumulated in
other comprehensive income are reclassified to net income in the same period that interest on certain floating rate loans (i.e. the
hedged items) affects income. A net gain after tax of $1,613 (2009 – $9,379) was reclassified to net income. During the year, nil
after tax (2009 – $5,410) was reclassified to other liabilities for derivatives terminated prior to maturity and the deferred balance
will be amortized into net interest income over the original hedged period. A net gain of nil (2009 – $1,678) after tax recorded in
accumulated other comprehensive income (loss) as at October 31, 2010 is expected to be reclassified to net income in the next
12 months and will offset variable cash flows from floating rate loans.

There were no forecasted transactions that failed to occur.

(Note 8)

(Note 25)

2010

46,477

39,566

6,418

7,536

7,458

2,910

7,593

4,277

122,235

2009

16,888

47,184

–

6,209

20,319

3,730

127

3,366

97,823

13. other Assets

Accounts receivable

Accrued interest receivable

Retained interests

Prepaid expenses

Future income tax asset
Financing costs(1)

Income taxes receivable

Other

Total

(1) Amortization for the year amounted to $1,374 (2009 – $989).

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CWB Group 2010 Annual Report

14. dePosits

Deposits are accounted for on an amortized cost basis. Costs relating to the issuance of fixed term deposits are amortized over the
expected life of the deposit using the effective interest method.

Payable on demand

Payable after notice

Payable on a fixed date
Deposit from CWB Capital Trust(1)

Total

Payable on demand

Payable after notice

Payable on a fixed date
Deposit from CWB Capital Trust(1)

Total

Business and

Financial

Individuals

Government

Institutions

2010

Total

23,308

507,300

1,840,026

5,462,231

–

1,159,573

1,713,329

105,000

–

2,000

–

530,608

2,999,599

7,177,560

105,000

7,325,565

3,485,202

2,000

$ 10,812,767

Business and

Financial

Individuals

Government

Institutions

2009

Total

20,028

339,148

1,660,715

4,717,146

–

1,117,886

1,655,315

105,000

–

2,000

–

359,176

2,778,601

6,374,461

105,000

6,397,889

3,217,349

2,000

9,617,238

(1) The senior deposit note of $105 million from CWB Capital Trust is reflected as a Business and Government deposit payable on a fixed date. This senior deposit note bears interest at an

annual rate of 6.199% until December 31, 2016 and, thereafter, at the CDOR 180-day Bankers’ Acceptance rate plus 2.55%. This note is redeemable at the Bank’s option, in whole or in part,
on and after December 31, 2011, or earlier in certain specified circumstances, both subject to the approval of OSFI. Each one thousand dollars of CWB Capital Trust Capital Securities Series
1 (WesTS) principal is convertible at any time into 40 non-cumulative redeemable CWB First Preferred Shares Series 1 of the Bank at the option of CWB Capital Trust. CWB Capital Trust will
exercise this conversion right in circumstances in which holders of WesTS exercise their holder exchange rights. See Note 15 for more information on WesTS and CWB Capital Trust.

15. cAPitAl trust securities

In 2006, the Bank arranged for the issuance of innovative capital instruments, CWB Capital Trust Capital Securities Series 1
(WesTS), through Canadian Western Bank Capital Trust (CWB Capital Trust), a special purpose entity. CWB Capital Trust, an
open-end trust, issued non-voting WesTS and the proceeds were used to purchase a senior deposit note from CWB.

CICA Accounting Guideline (AcG-15) provides a framework for identifying Variable Interest Entities (VIEs) and requires the
consolidation of a VIE if the Bank is the primary beneficiary of the VIE. The only special purpose entity in which the Bank
participates is CWB Capital Trust. Although CWB owns the unit holder’s equity and voting control of CWB Capital Trust
through Special Trust Securities, the Bank is not exposed to the majority of CWB Capital Trust losses and is, therefore, not the
primary beneficiary under AcG-15. Accordingly, CWB does not consolidate CWB Capital Trust and the WesTS issued by CWB
Capital Trust are not reported on the consolidated balance sheets, but the senior deposit note is reported in deposits (see Note
14) and interest expense is recognized on the senior deposit note.

Holders of WesTS are eligible to receive semi-annual non-cumulative fixed cash distributions. No cash distributions will be
payable by CWB Capital Trust on WesTS if CWB fails to declare regular dividends on its preferred shares or, if no preferred
shares are outstanding, on its common shares. In this case, the net distributable funds of CWB Capital Trust will be distributed to
the Bank as holder of the residual interest in CWB Capital Trust.

Should CWB Capital Trust fail to pay the semi-annual distributions in full, CWB has contractually agreed not to declare
dividends of any kind on any of the preferred or common shares for a specified period of time.

The following information presents the outstanding WesTS:

Issuance date
Distribution dates
Annual yield
Earliest date redeemable at the option of the issuer
Earliest date exchangeable at the option of the holder Anytime
Trust capital securities outstanding
105,000
$105,000
Principal amount

August 31, 2006
June 30, December 31
6.199%
December 31, 2011

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CWB Group 2010 Annual Report 93

The significant terms and conditions of the WesTS are:

1) Subject to the approval of OSFI, CWB Capital Trust may, in whole (but not in part), on the redemption date specified above,

and on any distribution date thereafter, redeem the WesTS without the consent of the holders.

2) Subject to the approval of OSFI, upon occurrence of a special event as defined, prior to the redemption date specified above,

CWB Capital Trust may redeem all, but not part, of the WesTS without the consent of the holders.

3) The WesTS may be redeemed for cash equivalent to (i) the early redemption price if the redemption occurs prior to

December 31, 2016 or (ii) the redemption price if the redemption occurs on or after December 31, 2016. Redemption price
refers to an amount equal to one thousand dollars plus the unpaid distributions to the redemption date. Early redemption
price refers to an amount equal to the greater of (i) the redemption price and (ii) the price calculated to provide an annual
yield, equal to the yield on a Government of Canada bond issued on the redemption date with a maturity date of December
31, 2016, plus 0.50%.

4) Holders of WesTS may, at any time, exchange each one thousand dollars of principal for 40 First Preferred Shares Series
1 of the Bank. CWB’s First Preferred Shares Series 1 pay semi-annual non-cumulative cash dividends with an annual yield
of 4.00% and will be redeemable at the option of the Bank, with OSFI approval, on or after December 31, 2011, but not
at the option of the holders. This exchange right will be effected through the conversion by CWB Capital Trust of the
corresponding amount of the deposit note of the Bank. The WesTS exchanged for the Bank’s First Preferred Shares Series 1
will be cancelled by CWB Capital Trust.

5) Each WesTS will be exchanged automatically without the consent of the holders for 40 non-cumulative redeemable CWB
First Preferred Shares Series 2 upon occurrence of any one of the following events: (i) proceedings are commenced for the
winding up of the Bank, (ii) OSFI takes control of the Bank, (iii) the Bank has a Tier 1 capital ratio of less than 5% or Total
capital ratio of less than 8%, or (iv) OSFI has directed the Bank to increase its capital or provide additional liquidity and
the Bank elects such automatic exchange or the Bank fails to comply with such direction. Following the occurrence of an
automatic exchange, the Bank would hold all of the Special Trust Securities and all of the WesTS, and the primary asset of
CWB Capital Trust would continue to be the senior deposit note. The Bank’s First Preferred Shares Series 2 pay semi-annual
non-cumulative cash dividends with an annual yield of 5.25% and will be redeemable at the option of the Bank, with OSFI
approval, on or after December 31, 2011, but not at the option of the holders.

6) For regulatory capital purposes, WesTS are included in Tier 1 capital to a maximum of 15% of net Tier 1 capital with the
remainder included in Tier 2 capital. All of the outstanding WesTS amounts are currently included in Tier 1 capital.

7) The non-cumulative cash distribution on the WesTS will be 6.199% paid semi-annually until December 31, 2016 and,

thereafter, at CDOR 180-day Bankers’ Acceptance rate plus 2.55%.

16.

insurAnce relAted other liABilities

Unpaid claims and adjustment expenses

Unearned premiums

Due to insurance companies and policyholders

Unearned commissions

Total

17. other liABilities

Accrued interest payable

Accounts payable

Acquisition contingent consideration

Future income tax liability

Deferred revenue

Leasehold inducements

Income taxes payable

Total

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CWB Group 2010 Annual Report

(Note 22)

(Note 25)

2010
80,086 $
66,444

2,305

561
149,396 $

2010
97,929 $
82,712

31,155

17,549

3,437

2,446

637
235,865 $

2009

81,025

62,307

1,425

752

145,509

2009

109,559

37,391

–

2,037

1,864

2,673

15,822

169,346

18. suBordinAted deBentures

Financing costs relating to the issuance of subordinated debentures are amortized over the expected life of the related
subordinated debenture using the effective interest method.

Each of the following qualifies as a bank debenture under the Bank Act and is subordinate in right of payment to all deposit
liabilities. All redemptions are subject to the approval of OSFI.

Interest

Rate

5.426%(1)
5.070%(2)
5.571%(3)
5.950%(4)
5.550%(5)

Total

Maturity

Date

Earliest Date

Redeemable

by CWB at Par

November 21, 2015

November 22, 2010

March 21, 2017

March 21, 2022

June 27, 2018

March 22, 2012

March 22, 2017

June 28, 2013

November 19, 2014

November 20, 2009

2010

70,000

120,000

75,000

50,000

–

315,000

2009

70,000

120,000

75,000

50,000

60,000

375,000

(1) These conventional debentures have a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day

Bankers’ Acceptance rate plus 180 basis points. On November 22, 2010, these conventional debentures were redeemed by the Bank (Note 37).

(3) These conventional debentures have a 15-year term with a fixed interest rate for the first 10 years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day

Bankers’ Acceptance rate plus 180 basis points.

(4) These conventional debentures have a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate will be reset quarterly at the Canadian dollar CDOR 90-day

Bankers’ Acceptance rate plus 302 basis points.

(5) These conventional debentures had a 10-year term with a fixed interest rate for the first five years. Thereafter, the interest rate would have been reset quarterly at the Canadian dollar CDOR

90-day Bankers’ Acceptance rate plus 160 basis points. On November 20, 2009, these conventional debentures were redeemed by the Bank.

19. cAPitAl stock

Authorized:

An unlimited number of common shares without nominal or par value;

33,964,324 class A shares without nominal or par value; and

25,000,000 first preferred shares without nominal or par value, issuable in series of which, 4,200,000 first preferred shares Series
1 and 4,200,000 first preferred shares Series 2 have been reserved (see Note 15). In addition, 8,390,000 first preferred shares
Series 3 have been issued and are convertible to first preferred shares Series 4 as noted below.

Issued and fully paid:

Preferred Shares – Series 3
Outstanding at beginning of year

Issued during the year

Outstanding at end of year

Common Shares
Outstanding at beginning of year

Issued on acquisition of subsidiary

(Note 34)

Issued on exercise or exchange of options

Issued under dividend reinvestment plan

Issued on exercise of warrants

Transferred from contributed surplus on exercise or exchange of options

Outstanding at end of year

Share Capital

2010

Number of

2009

Number of

Amount

8,390,000 $

209,750

–

8,390,000

209,750

– $

8,390,000

–

209,750

63,903,460

2,065,088

524,151

125,595

23,068

–

226,480

42,582

3,864

2,922

323

3,181

66,641,362

279,352

489,102

63,457,142

221,914

–

406,934

38,760

624

–

63,903,460

–

2,200

744

1,613

226,480

436,230

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CWB Group 2010 Annual Report 95

The Bank is prohibited by the Bank Act from declaring any dividends on common shares when the Bank is or would be placed,
as a result of the declaration, in contravention of the capital adequacy and liquidity regulations or any regulatory directives issued
under the Act. In addition, should CWB Capital Trust fail to pay the semi-annual distributions in full on the CWB Capital Trust
Securities Series 1 (see Note 15), the Bank has contractually agreed to not declare dividends on any of its common and preferred
shares for a specified period of time. These limitations do not restrict the current level of dividends.

a) Preferred Shares

During 2009, the Bank issued 8.4 million preferred units at $25.00 per unit, for total proceeds of $209.8 million. The preferred
units issued by way of the private placement and the public offering each consist of one Non-Cumulative 5-Year Rate Reset
Preferred Share, Series 3 (Series 3 Preferred Shares) in the capital of the Bank with an issue price of $25.00 per share and 1.7857
and 1.7800 common share purchase warrants, respectively. Each warrant is exercisable at a price of $14.00 to purchase one
common share in the capital of the Bank until March 3, 2014.

Holders of the Series 3 Preferred Shares are entitled to receive non-cumulative quarterly fixed dividends for the initial five-year
period ending April 30, 2014 of 7.25% per annum, payable quarterly, as and when declared by the Board of Directors. The
dividend rate on Series 3 Preferred Shares will reset May 1, 2014 and every five years thereafter at a level of 500 basis points
over the then current five-year Government of Canada bond yield. On April 30, 2014, and every five years thereafter, holders of
Series 3 Preferred Shares will, subject to certain conditions, have the option to convert their shares to Non-Cumulative Floating
Rate Preferred Shares, Series 4 (Series 4 Preferred Shares). Holders of the Series 4 Preferred Shares will be entitled to a floating
quarterly dividend rate equal to the 90-day Canadian treasury bill rate plus 500 basis points, as and when declared by the Board of
Directors.

The Series 3 Preferred Shares are not redeemable prior to April 30, 2014. Subject to the provisions of the Bank Act, the prior
consent of OSFI and the provisions described in the prospectus for the public offering, on April 30, 2014 and on April 30 every
five years thereafter, the Bank may redeem all or any part of the then outstanding Series 3 Preferred Shares at the Bank’s option
without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of $25.00 together with
all declared and unpaid dividends to the date fixed for redemption.

Subject to the provisions of the Bank Act, the prior consent of OSFI and the provisions described in the prospectus for the public
offering, on not more than 60 nor less than 30 days’ notice, the Bank may redeem all or any part of the then outstanding Series
4 Preferred Shares at the Bank’s option without the consent of the holder by the payment of an amount in cash for each such
share so redeemed of: (i) $25.00 together with all declared and unpaid dividends to the date fixed for redemption in the case of
redemptions on April 30, 2019 and on April 30 every five years thereafter; or (ii) $25.50 together with all declared and unpaid
dividends to the date fixed for redemption in the case of redemptions on any other date on or after April 30, 2014.

b) Warrants to Purchase Common Shares

Each warrant is exercisable at a price of $14.00 to purchase one common share in the capital of the Bank until March 3, 2014.

Number of Warrants
Outstanding at beginning of year

Issued

Purchased and cancelled

Exercised

Outstanding at end of year

c) Dividend Reinvestment Plan

2010

14,964,356

2009

–

14,964,980

(1,469,677)

(23,068)

13,471,611

–

(624)

14,964,356

Under the dividend reinvestment plan (plan), the Bank provides holders of the Bank’s common shares and holders of any other
class of shares deemed eligible by the Bank’s Board of Directors with the opportunity to direct cash dividends paid on any class
of their eligible shares towards the purchase of additional common shares. Currently, the Board of Directors has deemed that
the holders of the Bank’s Series 3 Preferred Shares are eligible to participate in the plan. The plan is only open to shareholders
residing in Canada.

At the option of the Bank, the common shares may be issued from the Bank’s treasury at an average market price based on the
closing prices of a board lot of common shares on the Toronto Stock Exchange for the five trading days immediately preceding
the dividend payment date, with a discount of between 0% to 5% at the Bank’s discretion. The Bank also has the option to fund
the plan through the open market at market prices. During the year, 125,595 (2009 – 38,760) common shares were issued under
the plan from the Bank’s treasury at a 2% (2009 – 2%) discount.

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CWB Group 2010 Annual Report

d) Normal Course Issuer Bid

On January 18, 2010 and subsequently amended on September 30, 2010, the Bank received approval from the Toronto Stock
Exchange to institute a Normal Course Issuer Bid (NCIB) to purchase and cancel up to 1,469,677 of its warrants. The NCIB
commenced January 20, 2010 and was completed in October 2010. During the year, the Bank purchased and cancelled 1,469,677
warrants fulfilling all available purchases under the NCIB at an aggregate cost of $16,453, which was charged to retained earnings.

20. stock BAsed comPensAtion

a) Stock Options

Stock options are accounted for using the fair value based method. The estimated value is recognized over the applicable vesting
period as an increase to both salary expense and contributed surplus. When options are exercised, the proceeds received and the
applicable amount, if any, in contributed surplus are credited to capital stock.

The Bank has authorized 5,324,319 common shares (2009 – 5,848,470) for issuance under the share incentive plan. Of the amount
authorized, options exercisable into 3,834,433 shares (2009 – 4,394,605) are issued and outstanding. The options generally vest
within three years and are exercisable at a fixed price equal to the average of the market price on the day of and the four days
preceding the grant date. All options expire within five years of date of grant. Outstanding options expire from December 2010 to
June 2015.

The details of, and changes in, the issued and outstanding options follow:

Options
Balance at beginning of year

Granted

Exercised or exchanged

Forfeited

Balance at end of year

Exercisable at end of year

2010

2009

Weighted

Average

Exercise

Price

18.66

22.67

16.24

21.04

19.93

Weighted

Average

Exercise

Price

20.83

13.33

10.56

26.88

18.66

Number

of Options

5,204,882 $

1,465,035

(933,900)

(1,341,412)

4,394,605 $

Number

of Options

4,394,605 $

632,386

(1,085,435)

(107,123)

3,834,433 $

1,109,850 $

22.84

1,742,100 $

18.22

Further details relating to stock options outstanding and exercisable follow:

Range of Exercise Prices
$8.58 to $11.76

$16.89 to $17.48

$21.11 to $21.46

$22.09 to $26.38

$28.11 to $31.18

Total

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Number of

Contractual

Options

949,000

461,750

944,740

1,264,913

214,030

3,834,433

Life (years)

3.1

3.4

1.2

3.0

2.1

2.6

Weighted

Average

Exercise

Price

11.70

16.92

21.46

24.18

31.13

19.93

Weighted

Average

Exercise

Price

Number

of Options

–

26,000

673,950

406,400

3,500

1,109,850

17.44

21.46

25.43

28.11

22.84

The terms of the share incentive plan allow the holders of vested options a cashless settlement alternative whereby the option holder
can either (a) elect to receive shares by delivering cash to the Bank in the amount of the option exercise price or (b) elect to receive
the number of shares equivalent to the excess of the market value of the shares under option, determined at the exercise date, over
the exercise price. Of the 1,085,435 (2009 – 933,900) options exercised or exchanged, option holders exchanged the rights to 842,025
(2009 – 722,400) options and received 280,741 (2009 – 195,434) shares in return under the cashless settlement alternative.

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CWB Group 2010 Annual Report 97

Salary expense of $5,106 (2009 – $6,745) was recognized relating to the estimated fair value of options granted, which included in
2009 the stock option forfeiture discussed below. The fair value of options granted was estimated using a binomial option pricing
model with the following variables and assumptions: (i) risk-free interest rate of 2.6% (2009 – 2.2%), (ii) expected option life
of 4.0 (2009 – 4.0) years, (iii) expected volatility of 44% (2009 – 38%), and (iv) expected dividends of 2.1% (2009 – 3.6%). The
weighted average fair value of options granted was estimated at $7.36 (2009 – $2.94) per share.

During 2009, certain employees voluntarily and irrevocably released, without consideration, all rights, title and interest in
1,283,062 stock options. The unamortized fair value of these forfeited options ($1,696) was recognized at that time as additional
non-tax deductible salary expense with an offsetting increase to contributed surplus.

During the year $3,181 (2009 – $1,613) was transferred from contributed surplus to share capital, representing the estimated fair
value recognized for 1,085,435 (2009 – 933,900) options exercised during the year.

b) Restricted Share Units

Under the Restricted Share Unit (RSU) plan, certain employees are eligible to receive an award in the form of RSUs. Each RSU
entitles the holder to receive the cash equivalent of the market value of the Bank’s common shares at the vesting date and an
amount equivalent to the dividends paid on the common shares during the vesting period. RSUs vest on each anniversary of the
grant in equal one-third instalments over a vesting period of three years. Salary expense is recognized evenly over the vesting
period except where the employee is eligible to retire prior to the vesting date, in which case the expense is recognized between
the grant date and the date the employee is eligible to retire.

During the year, salary expense of $4,628 (2009 – $3,985) was recognized related to RSUs. As at October 31, 2010, the liability
for the RSUs held under this plan was $6,335 (2009 – $3,985). At the end of each period, the liability and salary expense are
adjusted to reflect changes in the market value of the Bank’s common shares.

Number of RSUs
Balance at beginning of year

Granted

Vested and paid out

Forfeited

Balance at end of year

c) Deferred Share Units

2010

285,197

287,591

(92,997)

(9,850)

469,941

2009

–

286,929

–

(1,732)

285,197

During the year, the Bank adopted a plan to grant Deferred Share Units (DSUs) to non-employee directors of the Bank by
linking a portion of their annual compensation to the future value of the Bank’s common shares. Under this plan, non-employee
directors will receive at least 50% of their annual retainer in DSUs. The DSUs are not redeemable until the individual is no
longer a director and must be redeemed for cash. Common share dividend equivalents accrue to the directors in the form of
additional units. As at October 31, 2010, 24,046 DSUs were outstanding (2009 – nil).

The expense related to the DSUs is recorded in the period the award is earned by the director. During the year, non-interest
expenses “other expenses” included $358 related to the DSUs (2009 – nil). As at October 31, 2010, the liability for DSUs was
$610 (2009 – nil). At the end of each period, the liability and expense are adjusted to reflect changes in the market value of the
Bank’s common shares.

21. contingent liABilities And commitments

a) Credit Instruments

In the normal course of business, the Bank enters into various commitments and has contingent liabilities, which are not reflected
in the consolidated balance sheets. These items are reported below and are expressed in terms of the contractual amount of the
related commitment.

Credit instruments

Guarantees and standby letters of credit

Commitments to extend credit

Total

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CWB Group 2010 Annual Report

2010

2009

261,438

3,375,690

196,380

2,346,324

3,637,128

2,542,704

Guarantees and standby letters of credit represent the Bank’s obligation to make payments to third parties when a customer is
unable to make required payments or meet other contractual obligations. These instruments carry the same credit risk, recourse
and collateral security requirements as loans extended to customers and generally have a term that does not exceed one year.
Losses, if any, resulting from these transactions are not expected to be material.

Commitments to extend credit to customers also arise in the normal course of business and include undrawn availability under
lines of credit and commercial operating loans of $1,468,325 (2009 – $1,180,690) and recently authorized but unfunded loan
commitments of $1,907,365 (2009 – $1,165,634). In the majority of instances, availability of undrawn commercial commitments
is subject to the borrower meeting specified financial tests or other covenants regarding completion or satisfaction of certain
conditions precedent. It is also usual practice to include the right to review and withhold funding in the event of a material
adverse change in the financial condition of the borrower. From a liquidity perspective, undrawn credit authorizations will be
funded over time, with draws in many cases extending over a period of months. In some instances, authorizations are never
advanced or may be reduced because of changing requirements. Revolving credit authorizations are subject to repayment which,
on a pooled basis, also decreases liquidity risk.

b) Lease Commitments

The Bank has obligations under long-term, non-cancellable operating leases for the rental of premises. Minimum future lease
commitments for each of the five succeeding years and thereafter are as follows:

2011

2012

2013

2014

2015

2016 and thereafter

Total

c) Guarantees

8,437

8,091

8,053

7,652

7,521

19,636

59,390

A guarantee is defined as a contract that contingently requires the guarantor to make payments to a third party based on
(i) changes in an underlying economic characteristic that is related to an asset, liability or equity security of the guaranteed party,
(ii) failure of another party to perform under an obligating agreement, or (iii) failure of another third party to pay indebtedness when due.

Significant guarantees provided to third parties include guarantees and standby letters of credit as discussed above.

In the ordinary course of business, the Bank enters into contractual arrangements under which the Bank may agree to indemnify
the other party. Under these agreements, the Bank may be required to compensate counterparties for costs incurred as a result
of various contingencies, such as changes in laws and regulations and litigation claims. A maximum potential liability cannot
be identified as the terms of these arrangements vary and generally no predetermined amounts or limits are identified. The
likelihood of occurrence of contingent events that would trigger payment under these arrangements is either remote or difficult
to predict and, in the past, payments under these arrangements have been insignificant.

The Bank issues personal and business credit cards through an agreement with a third party card issuer. The Bank has
indemnified the card issuer from loss if there is a default on the issuer’s collection of the business credit card balances. The Bank
has provided no indemnification relating to the personal or reward credit card balances. The issuance of business credit cards
and establishment of business credit card limits are approved by the Bank and subject to the same credit assessment, approval
and monitoring as the extension of direct loans. At year end, the total approved business credit card limit was $13,153 (2009 –
$10,496), and the balance outstanding was $2,927 (2009 – $2,566).

No amounts are reflected in the consolidated financial statements related to these guarantees and indemnifications.

d) Legal Proceedings

In the ordinary course of business, the Bank and its subsidiaries are party to legal proceedings. Based on current knowledge, the
Bank does not expect the outcome of any of these proceedings to have a material effect on the consolidated financial position or
results of operations.

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CWB Group 2010 Annual Report 99

22.

insurAnce oPerAtions

Premiums Earned and Deferred Policy Acquisition Costs

Insurance premiums are included in other income on a daily pro rata basis over the terms of the underlying insurance policies.
Unearned premiums represent the portion of premiums written that relate to the unexpired term of the policies in force and are
included in other liabilities.

Policy acquisition costs are those expenses incurred in the acquisition of insurance business. Acquisition costs comprise advertising
and marketing expenses, insurance advisor salaries and benefits, premium taxes and other expenses directly attributable to the
production of business. Policy acquisition costs related to unearned premiums are only deferred, and included in other assets,
to the extent that they are expected to be recovered from unearned premiums and are amortized to income over the periods in
which the premiums are earned. If the unearned premiums are not sufficient to pay expected claims and expenses (including policy
maintenance expenses and unamortized policy acquisition costs), a premium deficiency is said to exist. Anticipated investment
income is considered in determining whether a premium deficiency exists. Premium deficiencies are recognized by writing down
the deferred policy acquisition cost asset.

Unpaid Claims and Adjustment Expenses

The provision for unpaid claims represents the amounts needed to provide for the estimated ultimate expected cost of settling
claims related to insured events (both reported and unreported) that have occurred on or before each balance sheet date.
The provision for adjustment expenses represents the estimated ultimate expected costs of investigating, resolving and processing
these claims. These provisions are included in other liabilities and their computation takes into account the time value of money
using discount rates based on projected investment income from the assets supporting the provisions.

The provisions are periodically reviewed and evaluated in light of emerging claims experience and changing circumstances.
The resulting changes in estimates of the ultimate liability are recorded as incurred claims in the current period.

Reinsurance Ceded

Earned premiums and claims expenses are recorded net of amounts ceded to, and recoverable from, reinsurers. Estimates
of amounts recoverable from reinsurers on unpaid claims and adjustment expense are recorded in other assets and are estimated
in a manner consistent with the liabilities associated with the reinsured policies.

a) Insurance Revenues, Net

Insurance revenues, net, reported in other income on the consolidated statements of income are presented net of claims,
adjustment expenses and policy acquisition costs.

Net earned premiums

Commissions and processing fees

Net claims and adjustment expenses

Policy acquisition costs

Insurance revenues, net

b) Unpaid Claims and Adjustment Expenses

Nature of Unpaid Claims

2010
111,368 $
2,347

(68,641)

(23,358)
21,716 $

2009

104,062

2,852

(68,996)

(20,802)

17,116

The establishment of the provision for unpaid claims and adjustment expenses and the related reinsurers’ share is based on known
facts and interpretation of circumstances and is, therefore, a complex and dynamic process influenced by a large variety of factors.
These factors include experience with similar cases and historical trends involving claim payment patterns, loss payments, pending
levels of unpaid claims, product mix or concentration, claims severity, and claims frequency patterns.

Other factors include the continually evolving and changing regulatory and legal environment, actuarial studies, professional
experience and expertise of the claims department personnel and independent adjusters retained to handle individual claims,
quality of the data used for projection purposes, existing claims management practices, including claims handling and settlement

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practices, effect of inflationary trends on future claims settlement costs, investment rates of return, court decisions, economic
conditions and public attitudes. In addition, time can be a critical part of the provision determination since, the longer the span
between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can
be. Accordingly, short-tailed claims, such as property claims, tend to be more reasonably predictable than long-tailed claims, such
as liability claims.

Consequently, the establishment of the provision for unpaid claims and adjustment expenses relies on the judgment and opinions
of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends
and on expectations as to future developments. The process of determining the provisions necessarily involves risks that the actual
results will deviate, perhaps substantially, from the best estimates made.

Provision for Unpaid Claims and Adjustment Expenses

An annual evaluation of the adequacy of unpaid claims is completed at the end of each financial year. This evaluation includes
a re-estimation of the liability for unpaid claims relating to each preceding financial year compared to the liability that was originally
established. The results of this comparison and the changes in the provision for unpaid claims and adjustment expenses follow:

Unpaid claims and adjustment expenses, net, beginning of year

Claims incurred

In the current year

In prior periods

Claims paid during the year

Unpaid claims and adjustment expenses, net, end of year

Reinsurers’ share of unpaid claims and adjustment expenses

Recoverable on unpaid claims

Unpaid claims and adjustment expenses, net, end of year

2010

63,281

70,098

(1,457)

(69,111)

62,811

10,949

6,326

80,086

2009

57,676

73,346

(4,350)

(63,391)

63,281

10,441

7,303

81,025

The provision for unpaid claims and adjustment expenses and related reinsurance recoveries are discounted using rates based
on the projected investment income from the assets supporting the provisions, and reflecting the estimated timing of payments
and recoveries. The investment rate of return used for all cash flow periods and all lines of business was 2.96% (2009 – 2.75%).
However, that rate was reduced by a 1% (2009 – 1%) provision for adverse deviation in discounting the provision for unpaid
claims and adjustment expenses and related reinsurance recoveries. The impact of this provision for adverse deviation results
in an increase of $901 (2009 – $887) in unpaid claims and adjustment expenses and related reinsurance recoveries.

Policy balances, included in insurance related other assets and other liabilities, analyzed by major lines of business are as follows:

Unpaid claims and adjustment expenses

Reinsurers’ share of unpaid claims and adjustment expenses

Unearned premiums

c) Underwriting Policy and Reinsurance Ceded

2010

Automobile

65,486

9,967

46,622

Home

14,600

982

19,822

2009

Automobile

65,736

9,984

44,635

Home

15,289

457

17,672

Reinsurance contracts with coverage up to maximum policy limits are entered into to protect against losses in excess of certain
amounts that may arise from automobile, personal property and liability claims.

Reinsurance with a limit of $200,000 (2009 – $180,000) is obtained to protect against certain catastrophic losses. Retention
on catastrophic events and property and liability risks is generally $1,000 (2009 – $1,000). For the British Columbia automobile
insurance product, retentions are further reduced by the underlying mandatory coverage provided by the provincially governed
Crown corporation. Reinsurance coverage is diversified across many reinsurers in order to spread risk and reduce reinsurer
concentration risk in the event of a very large loss, such as an earthquake. The reinsurers selected to participate in the program
have a minimum rating of A- from A.M. Best or Standard & Poor’s. In addition, reinsurance treaties have a special termination
clause allowing the Bank to change a reinsurer during the term of the agreement if their rating falls below the specified level.

At October 31, 2010, $10,949 (2009 – $10,441) of unpaid claims and adjustment expenses were recorded as recoverable from
reinsurers. Failure of a reinsurer to honour its obligation could result in losses. The financial condition of reinsurers is regularly
evaluated to minimize the exposure to significant losses from reinsurer insolvency.

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CWB Group 2010 Annual Report 101

The amounts shown in other income are net of the following amounts relating to reinsurance ceded to other insurance companies.

Premiums earned reduced by

Claims incurred reduced by

23. disclosures on rAte regulAtion

2010
8,947 $
5,723

2009

7,257

595

Canadian Direct Insurance Incorporated (Canadian Direct), a wholly owned subsidiary, is licensed under insurance legislation in
the provinces in which it conducts business. Automobile insurance is a compulsory product and is subject to different regulations
across the provinces in Canada, including those with respect to rate setting. Rate setting mechanisms vary across the provinces,
but they generally fall under three categories: “use and file”, “file and use” and “file and approve”. Under “use and file”, rates are
filed following use. Under “file and use”, insurers file their rates with the relevant authorities and wait for a prescribed period
of time and then implement the proposed rates. Under “file and approve”, insurers must wait for specific approval of filed rates
before they may be used.

The authorities that regulate automobile insurance rates, in the provinces in which Canadian Direct is writing that business, are
listed below. Automobile direct written premiums in these provinces totaled $39,500 in 2010 (2009 – $36,900) and represented
49% (2009 – 47%) of direct automobile premiums written.

Province

Alberta

rate filing

File and approve or
File and use

regulatory Authority

Alberta Automobile Insurance Rate Board

While regulatory authorities generally approve rates and rate adjustments prospectively, in some circumstances retroactive rate
adjustments in respect of historical results may be required, which could result in a liability for the Bank. As at October 31, 2010,
the Bank had no such liability although the reinstatement of the Alberta automobile Minor Injury Regulation and its impact on
rates is being reviewed by the relevant regulatory authority.

24. emPloyee future Benefits

All employee future benefits are accounted for on an accrual basis. The Bank’s contributions to the group retirement savings plan
and employee share purchase plan totaled $8,864 (2009 – $7,077).

25.

income tAXes

The Bank follows the asset and liability method of accounting for income taxes whereby current income taxes are recognized for
the estimated income taxes payable for the current year. Future tax assets and liabilities represent the cumulative amount of tax
applicable to temporary differences between the carrying amount of the assets and liabilities, and their values for tax purposes.
Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. Changes in future income taxes related
to a change in tax rates are recognized in income in the period of the tax rate change. All future income tax assets and liabilities
are expected to be realized in the normal course of operations.

The provision for income taxes consists of the following:

Consolidated statements of income

Current

Future

Shareholders’ equity

Future income tax expense related to:

Unrealized gains (losses) on available-for-sale securities

Gains (losses) on derivatives designated as cash flow hedges

Total

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CWB Group 2010 Annual Report

2010

2009

63,493 $
(16,149)

47,344

55,553

(13,633)

41,920

2,159

(636)

1,523
48,867 $

12,425

(2,233)

10,192

52,112

A reconciliation of the statutory tax rates and income tax that would be payable at these rates to the effective income tax rates and
provision for income taxes that is reported in the consolidated statements of income follows:

Combined Canadian federal and provincial income taxes

and statutory tax rate

Increase (decrease) arising from:

Tax-exempt income

Resolution of outstanding issues

Stock-based compensation

Other

Provision for income taxes and effective tax rate

Future income tax balances are comprised of the following:

Net future income tax assets
Allowance for credit losses

Deferred loan fees

Deferred agent commission

Leasing income

Other temporary differences

Net future income tax liabilities

Intangible assets

Leasing income

Other temporary differences

2010

2009

60,327

28.6% $

43,743

29.5%

(9,480)

(7,488)

1,451

2,534

47,344

(4.5)

(3.6)

0.7

1.2
22.4% $

(5,329)

–

1,985

1,521

41,920

(3.6)

–

1.3

1.0

28.2%

2010

2009

14,240

4,365

(3,688)

(2,800)

(4,659)

7,458

11,459

5,733

357

17,549

16,487

3,448

(3,198)

–

3,582

20,319

2,217

–

(180)

2,037

The Bank has approximately $11,140 (2009 – $11,140) of capital losses that are available to apply against future capital gains and
have no expiry date. The tax benefit of these losses has not been recognized in the consolidated financial statements.

26. eArnings Per common shAre

Basic earnings per common share is calculated based on the average number of common shares outstanding during the year.
Diluted earnings per share is calculated based on the treasury stock method, which assumes that any proceeds from the exercise of
in-the-money stock options would be used to purchase the Bank’s common shares at the average market price during the year.

The calculation of earnings per common share follows:

Numerator

Net income available to common shareholders

Denominator

Weighted average of common shares outstanding – basic

Dilutive instruments:

Warrants
Stock options(1)

Weighted average number of common shares outstanding – diluted

Earnings per Common Share

Basic

Diluted

2010

2009

148,413 $

96,223

65,756,653

63,613,398

5,796,819

775,360

72,328,832

1,439,723

281,442

65,334,563

2.26 $
2.05

1.51

1.47

(1) At October 31, 2010, the denominator excludes 832,830 (2009 – 1,122,170) employee stock options with an average adjusted exercise price of $27.23 (2009 – $28.58) where the exercise

price, adjusted for unrecognized stock-based compensation, is greater than the average market price.

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CWB Group 2010 Annual Report 103

27. Assets under AdministrAtion And mAnAgement

Assets under administration of $8,530,716 (2009 – $5,467,447) and assets under management of $795,467 (2009 – $878,095)
represent the fair value of assets held for personal, corporate and institutional clients as well as third party leases subject to service
agreements. The assets are kept separate from the Bank’s own assets. Assets under administration and management are not
reflected in the consolidated balance sheets and relate to the banking and trust segment.

28. relAted PArty trAnsActions

The Bank makes loans, primarily residential mortgages, to its officers and employees at various preferred rates and terms. The
total amount outstanding for these types of loans is $75,035 (2009 – $62,861). The Bank offers deposits, primarily fixed term
deposits to its officers, employees and their immediate family at preferred rates. The total amount outstanding for these types of
deposits is $162,805 (2009 – $139,871).

29.

interest rAte sensitivity

The Bank is exposed to interest rate risk as a result of a difference, or gap, between the maturity or repricing behaviour of interest
sensitive assets and liabilities. The interest rate gap is managed by forecasting core balance trends. The repricing profile of these
assets and liabilities has been incorporated in the table following showing the gap position at October 31 for select time intervals.
Figures in brackets represent an excess of liabilities over assets or a negative gap position.

ASSET LIABILITY GAP POSITIONS
($ millions)

October 31, 2010
Assets(2)
Cash resources and securities

Loans

Other assets
Derivative financial instruments(1)

Total

Liabilities(2) and Equity
Deposits

Other liabilities
Debentures(3)

Shareholders’ equity

Derivative financial instruments

Total

Interest Rate Sensitive Gap

Cumulative Gap

Cumulative Gap as a

Floating
Rate

and Within
1 Month

1 to 3
Months

3 Months
to 1 Year

Total
Within
1 Year

1 Year to
5 Years

More than
5 Years

Non-
Interest
Sensitive

Total

467

4,926

–

105

5,498

184

535

–

316

967

735

1,104

6,565

3,858

–

105

–

719

1,420

7,637

4,593

4,318

905

–

105

4,496

1,002

–

912

(193)

809

7,232

3,494

2,009

–

2,039

–

105

7,447

170

–

3,698

895

1,085

(619)

190

187

1,130

105

127

–

232

105

–

1,876

(53)

329

–

345

(18)

345

–

1,148

–

1,475

(1,130)

–

10,497

329

105

12,807

10,813

426

315

1,148

105

12,807

–

Percentage of Total Assets

7.8%

6.3%

1.5%

8.5%

8.8%

October 31, 2009

Total assets

Total liabilities and equity

Interest Rate Sensitive Gap

Cumulative Gap

Cumulative Gap as a

4,884

4,398

486

621

832

(211)

275

1,520

7,025

4,463

1,587

6,817

(67)

208

3,619

844

1,052

209

188

1,073

Percentage of Total Assets

4.1%

2.3%

1.8%

8.9%

9.0%

178

$ 11,875

1,251

(1,073)

–

11,875

–

(1) Derivative financial instruments are included in this table at the notional amount.
(2) Accrued interest is excluded in calculating interest sensitive assets and liabilities.
(3) Potential prepayments of fixed rate loans and early redemption of redeemable fixed term deposits have not been estimated. Redemptions of fixed term deposits

where depositors have this option are not expected to be material. The majority of fixed rate loans, mortgages and leases are either closed or carry prepayment penalties.

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CWB Group 2010 Annual Report

The effective, weighted average interest rates for each class of financial asset and liability are shown below:

WEIGHTED AVERAGE EFFECTIVE INTEREST RATES
(%)

October 31, 2010
Total assets

Total liabilities

Interest Rate Sensitive Gap

October 31, 2009

Total assets

Total liabilities

Interest Rate Sensitive Gap

Floating Rate
and Within
1 Month

1 to 3
Months

3 Months
to 1 Year

3.9%

1.2

2.7%

3.8%

0.7

3.1%

2.8%

2.0

0.8%

2.6%

2.4

0.2%

4.9%

2.6

2.3%

4.5%

3.1

1.4%

Total
Within
1 Year

4.0%

1.7

2.3%

3.8%

1.4

2.4%

1 Year to
5 Years

More than
5 Years

5.5%

3.2

2.3%

4.9%

3.6

1.3%

5.2%

5.8

(0.6)%

5.8%

5.8

0.0%

Total

4.6%

2.3

2.3%

4.3%

2.3

2.0%

Based on the current interest rate gap position, it is estimated that a one-percentage point increase in all interest rates
would increase net interest income by approximately 2.3% or $7,372 (October 31, 2009 – 2.5% or $6,574 decrease to net
interest income) and decrease other comprehensive income $9,796 (October 31, 2009 – $21,355) net of tax, respectively
over the following twelve months. A one-percentage point decrease in all interest rates would decrease net interest income
by approximately 1.5% or $4,703 (October 31, 2009 – 3.8% or $10,241 increase to net interest income) and increase other
comprehensive income $9,796 (October 31, 2009 – $21,355) net of tax.

30. fAir vAlue of finAnciAl instruments

The fair value of a financial instrument on initial recognition is the value of the consideration given or received. Subsequent
to initial recognition, financial instruments measured at fair value that are quoted in active markets are based on bid prices for
financial assets and offer prices for financial liabilities. For certain securities and derivative financial instruments where an active
market does not exist, fair values are determined using valuation techniques that refer to observable market data, including
discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

The fair value of financial assets recorded on the consolidated balance sheets at fair value (cash, securities, securities purchased
under resale agreements, retained interest in securitized assets and derivatives) was determined using published market prices
quoted in active markets (referred to as Level 1) and estimated using a valuation technique based on observable market data
(referred to as Level 2). The fair value of liabilities recorded on the consolidated balance sheets at fair value (derivatives) was
determined using a valuation technique based on observable market data. There were no financial instruments measured using
unobservable market data (referred to as Level 3).

Financial Assets
Cash resources

Securities

Securities purchased under resale agreements

Retained interest in securitized assets

Derivative related

October 31, 2010
October 31, 2009

Financial Liabilities
Derivative related

October 31, 2010
October 31, 2009

Fair Value

Level 1

Level 2

Level 3

Valuation Technique

187,944

181,143

6,801

$ –

1,510,187

177,954

9,703

134

1,885,922
2,190,847

992

992
300,316

$
$

1,510,187

–

1,691,330
2,182,022

–

–
–

$
$

––

177,954

9,703

134

194,592
8,825

$ –

992

992
300,316

$ –

$ –
$

–

Fair value represents the estimated consideration that would be agreed upon in a current transaction between knowledgeable,
willing parties who are under no compulsion to act. The fair value of a financial instrument on initial recognition is normally the
transaction price (i.e. the value of the consideration given or received). Subsequent to initial recognition, financial instruments
measured at fair value on the consolidated balance sheets that are quoted in active markets are based on bid prices for financial

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CWB Group 2010 Annual Report 105

assets and offer prices for financial liabilities. For certain securities and derivative financial instruments where an active market
does not exist, fair values are determined using valuation techniques that refer to observable market data, including discounted
cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

Several of the Bank’s significant financial instruments, such as loans and deposits, lack an available trading market as they are not
typically exchanged. Therefore, these instruments have been valued assuming they will not be sold, using present value or other
suitable techniques and are not necessarily representative of the amounts realizable in an immediate settlement of the instrument.

Changes in interest rates are the main cause of changes in the fair value of the Bank’s financial instruments. The carrying value
of loans, deposits and subordinated debentures are not adjusted to reflect increases or decreases in fair value due to interest rate
changes as the Bank’s intention is to realize their value over time by holding them to maturity.

The table below sets out the fair values of financial instruments (including derivatives) using the valuation methods and assumptions
referred to below the table. The table does not include assets and liabilities that are not considered financial instruments.

2010

2009

Fair Value

Over (Under)

Fair Value

Over (Under)

Book Value

Fair Value

Book Value

Fair Value

Book Value

Assets

Cash resources

Securities

(Note 3)

(Note 4)

Securities purchased under

resale agreements

Loans(1)
Other assets(2)

Derivative related

Liabilities

Deposits(1)
Other liabilities(3)

Securities sold under

repurchase agreements

Subordinated debentures

Derivative related

187,944 $

1,510,187

– $
–

297,104 $

1,891,409

177,954

10,550,380

10,583,395

142,524

134

142,524

134

–

33,015

–

10,826,670

10,883,873

57,203

302,479

–

315,000

992

–

320,056

992

–

5,056

–

9,320,749

9,368,074

47,325

97,179

2,334

97,179

2,334

9,628,949

265,295

9,739,360

265,295

300,242

375,000

300,242

377,363

–

110,411

–

2,363

–

(1) Loans and deposits exclude deferred premiums and deferred revenue, which are not financial instruments.
(2) Other assets exclude property and equipment, goodwill and other intangible assets, reinsurers’ share of unpaid claims and adjustment expenses, future income tax asset, prepaid and

deferred expenses, financing costs and other items that are not financial instruments.

(3) Other liabilities exclude future income tax liability, deferred revenue, unearned insurance premiums and other items that are not financial instruments.
(4) For further information on interest rates associated with financial assets and liabilities, including derivative instruments, refer to Note 29.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:

· cash resources and securities are reported on the consolidated balance sheets at the fair value disclosed in Notes 3 and 4. These
values are based on quoted market prices, if available. Where a quoted market price is not readily available, other valuation
techniques are based on observable market rates used to estimate fair value;

loans reflect changes in the general level of interest rates that have occurred since the loans were originated and are net of the
allowance for credit losses. For floating rate loans, fair value is assumed to be equal to book value as the interest rates on these
loans automatically reprice to market. For all other loans, fair value is estimated by discounting the expected future cash flows
of these loans at current market rates for loans with similar terms and risks;

· other assets and other liabilities, with the exception of derivative financial instruments, are assumed to approximate their

carrying value, due to their short-term nature;

for derivative financial instruments where an active market does not exist, fair values are determined using valuation techniques
that refer to observable market data, including discounted cash flow analysis, option pricing models and other valuation
techniques commonly used by market participants;

· deposits with no stated maturity are assumed to be equal to their carrying values. The estimated fair values of fixed rate deposits

are determined by discounting the contractual cash flows at current market rates for deposits of similar terms; and

· the fair values of subordinated debentures are determined by reference to current market prices for debt with similar terms and risks.

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Fair values are based on management’s best estimates based on market conditions and pricing policies at a certain point in time.
The estimates are subjective and involve particular assumptions and matters of judgment and, as such, may not be reflective of
future fair values.

31. risk mAnAgement

As part of the Bank’s risk management practices, the risks that are significant to the business are identified, monitored and controlled.
The most significant risks include credit risk, liquidity risk, market risk, insurance risk, operational risk and litigation risk. The nature of
these risks and how they are managed is provided in the Risk Management section of the Management Discussion and Analysis (MD&A).

As permitted by the CICA, certain of the risk management disclosure related to risks inherent with financial instruments is in
the MD&A. The relevant MD&A sections are identified by shading within boxes and the content forms an integral part of these
audited consolidated financial statements.

Information on specific measures of risk, including the allowance for credit losses, derivative financial instruments, interest
rate sensitivity, fair value of financial instruments and liability for unpaid claims are included elsewhere in these notes to the
consolidated financial statements.

32. cAPitAl mAnAgement

The Bank has a share incentive plan that is provided to officers and employees who are in a position to materially impact the
longer term financial success of the Bank as measured by share price appreciation and dividend yield. Note 20 to the consolidated
financial statements details the number of shares under options outstanding, the weighted average exercise price and the amounts
exercisable at year end.

The Bank has warrants outstanding and exercisable at a price of $14.00 to purchase one common share until March 3, 2014. Note
19 to the consolidated financial statements details the number of warrants outstanding.

Basel II Capital Adequacy Accord

Regulatory capital and capital ratios are calculated in accordance with the requirements of the OSFI, and capital is managed and
reported in accordance with the requirements of the Basel II Capital Adequacy Accord (Basel II). OSFI requires banks to measure
capital adequacy in accordance with instructions for determining risk-adjusted capital and risk-weighted assets, including off-balance
sheet commitments, which is commonly referred to as Basel II. Based on the deemed credit risk of each type of asset, a weighting
of 0% to 150% is assigned. As an example, a loan that is fully insured by the Canada Mortgage and Housing Corporation (CMHC)
is applied a risk weighting of 0% as the Bank’s risk of loss is nil, while uninsured commercial loans are assigned a risk weighting
of 100% to reflect the higher level of risk associated with this type of asset. The ratio of regulatory capital to risk-weighted assets
is calculated and compared to OSFI’s standards for Canadian financial institutions. Off-balance sheet assets, such as the notional
amount of derivatives and some credit commitments, are included in the calculation of risk-weighted assets and both the credit risk
equivalent and the risk-weighted calculations are prescribed by OSFI. As Canadian Direct (CDI) is subject to separate OSFI capital
requirements specific to insurance companies, the Bank’s investment in CDI is deducted from total capital and CDI’s assets are
excluded from the calculation of risk-weighted assets.

Current regulatory guidelines require banks to maintain a minimum ratio of capital to risk-weighted assets and off-balance sheet
items of 8%, of which 4% must be core capital (Tier 1) and the remainder supplementary capital (Tier 2). However, OSFI has
established that Canadian banks need to maintain a minimum total capital adequacy ratio of 10% with a Tier 1 ratio of not less
than 7%. CWB’s Tier 1 capital is comprised of common shareholders’ equity and innovative capital (to a regulatory maximum of
15% of net Tier 1 capital), while Tier 2 capital includes subordinated debentures (to the regulatory maximum amount of 50% of
net Tier 1 capital), the inclusion of the general allowance for credit losses (to the regulatory maximum) and any innovative capital
not included in Tier 1.

knowing whAt works

CWB Group 2010 Annual Report 107

During the year, the Bank complied with all internal and external capital requirements.

CAPITAL STRUCTURE AND REGULATORY RATIOS AT YEAR END
($ thousands)

Tier 1 Capital

Retained earnings

Preferred shares

Common shares

Contributed surplus
Innovative capital instrument(1)

Non-controlling interest in subsidiary

Less goodwill of subsidiaries
Less securitization

Total

Tier 2 Capital

General allowance for credit losses (Tier A)(2)
Accumulated unrealized gains on available-for-sale equity securities, net of tax(3)
Subordinated debentures (Tier B)(4)

Total

Less investment in insurance subsidiary

Less securitization

Total Regulatory Capital

Regulatory Capital to Risk-Weighted Assets

Tier 1 capital

Tier 2 capital

Less investment in insurance subsidiary and securitization

Total Regulatory Capital Adequacy Ratio
Assets to Regulatory Capital Multiple(5)

2010

2009

614,710

209,750

279,352

21,291

105,000

180

(37,723)

(8,880)

511,784

209,750

226,480

19,366

105,000

267

(9,360)

–

1,183,680

1,063,287

59,603

16,119

315,000

390,722

(68,993)

(8,880)

61,153

2,118

380,000

443,271

(56,768)

–

1,496,529

1,449,790

11.3%

3.7

(0.7)

14.3%

8.5

11.3%

4.7

(0.6)

15.4%

8.1

(1) The innovative capital instrument consists of CWB’s WesTS and may be included in Tier 1 capital to a maximum of 15% of net Tier 1 capital. Any excess innovative capital outstanding is

included in Tier 2B capital.

(2) Banks are allowed to include their general allowance for credit losses up to a prescribed percentage of risk-weighted assets in Tier 2A capital. At October 31, 2010, the Bank’s general

allowance represented 0.57% (2009 – 0.65%) of risk-weighted assets.

(3) Accumulated other comprehensive income related to unrealized losses on certain available-for-sale equity securities, net of tax, reduces Tier 1 capital, while unrealized gains on certain

available-for-sale equity securities, net of tax, increases Tier 2 capital.

(4) Tier 2B capital may be included in Tier 2 capital to a maximum of 50% of net Tier 1 capital. Any excess Tier 2B capital is included in capital as net Tier 1 capital increases. At October 31, 2010

and 2009, all subordinated debentures are included in Tier 2B capital. See also Note 37.

(5) Total assets plus off-balance sheet credit instruments, such as letters of credit and guarantees, less goodwill divided by regulatory capital.

108

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CWB Group 2010 Annual Report

33. segmented informAtion

The Bank operates principally in two industry segments – banking and trust, and insurance. These two segments differ in
products and services but are both within the same geographic region.

The banking and trust segment provides banking, including equipment leases from National Leasing, as well as trust and wealth
management services to personal clients, small to medium-sized commercial business clients and institutional clients primarily in
Western Canada. The insurance segment provides home and auto insurance to individuals in British Columbia and Alberta.

Net interest income (teb)(1)

Less teb adjustment

Net interest income per financial statements
Other income(2)

Total revenues

Provision for credit losses
Non-interest expenses(3)

Provision for income taxes

Non-controlling interest in subsidiary

Net income(4)
Total average assets ($ millions)(5)

Banking and Trust

Insurance

Total

2010

2009

321,640 $ 230,227 $
10,285

7,203

2010
7,024 $
901

2009
6,127 $
644

2010

2009
328,664 $ 236,354
7,847
11,186

311,355

83,393

394,748

20,413

179,734

43,153

223,024

74,013

297,037

13,500

147,571

38,560

6,123

22,202

28,325

–

11,746

4,191

5,483

17,599

23,082

–

10,611

3,360

317,478

105,595

423,073

20,413

191,480

47,344

228,507

91,612

320,119

13,500

158,182

41,920

215
151,233 $
11,792 $

232
97,174 $
11,055 $

–
12,388 $
215 $

–
9,111 $
198 $

215

232
163,621 $ 106,285
11,253
12,007 $

(1) Taxable Equivalent Basis (teb) – Most banks analyze revenue on a taxable equivalent basis to permit measurement and comparison of net interest income. Net interest income (as presented
in the consolidated statements of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower
than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would
have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not
be comparable to similar measures presented by other banks.

(2) Other income for the insurance segment is presented net of claims, adjustment costs and policy acquisition costs (see Note 22) and also includes the gain on the sale of securities.
(3) Amortization of intangible assets of $3,817 (2009 – $1,020) is included in the banking and trust segment and $250 (2009 – $250) in the insurance segment. Amortization of property and
equipment total $8,450 (2009 – $6,000) for the banking and trust segment and $1,583 (2009 – $1,503) for the insurance segment while additions amounted to $19,274 (2009 – $13,422)
for the banking and trust segment and $1,816 (2009 – $1,387) for the insurance segment. Goodwill of $34,469 (2009 – $6,106) is allocated to the banking and trust segment and $3,254
(2009 – $3,254) to the insurance segment.

(4) Transactions between the segments are reported at the exchange amount, which approximates fair market value.
(5) Assets are disclosed on an average daily balance basis as this measure is most relevant to a financial institution and is the measure reviewed by management.

34. AcQuisition of suBsidiAry

On February 1, 2010, the Bank acquired 100% of the outstanding common shares of National Leasing in exchange for
$52,826 in cash, 2,065,088 common shares of the Bank ($42,582) and estimated contingent consideration for a total cost of
$126,618. Both the Bank and the vendors have the option to trigger the payment of the contingent consideration no earlier
than November 1, 2012. The final amount of the contingent consideration is not yet determinable and under Canadian
GAAP, any change will be recognized as an adjustment to goodwill in the period in which the contingency is resolved.

National Leasing is a commercial equipment leasing company for small to mid-size transactions. National Leasing is
headquartered in Winnipeg, Manitoba, and at acquisition had over 58,000 lease agreements with a collective book value of
approximately $657,000, including securitized assets which comprised approximately one half of the portfolio.

Details of the fair values of assets and liabilities acquired are as follows:

Assets and Liabilities Acquired at Fair Value

Leases

Intangible assets

Goodwill

Retained interest in securitized assets

Long-term debt

Future income tax liabilities

Other items, net

Net assets acquired

$ 322,512

40,708

27,937

19,109

(270,630)

(10,611)

(2,407)

$ 126,618

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CWB Group 2010 Annual Report 109

Intangible assets include customer relationships, computer software, non-competition agreements, lease administration contracts
and trademarks. The trademark, which has an estimated value of $1,610, is not subject to amortization. National Leasing’s
financial results, the goodwill and other intangible assets related to the acquisition are included in the banking and trust segment.
The total amount of goodwill and intangible assets are not deductible for income tax purposes. The long-term debt was repaid
immediately after the acquisition.

35. suBsidiAries And AffiliAte

canadian weSTern bank SubSidiarieS(1)
(annexed in accordance with subsection 308 (3) of the Bank Act)

october 31, 2010

National Leasing Group Inc.

Address of

Head Office

1525 Buffalo Place

Winnipeg, Manitoba

Carrying Value of

Voting Shares Owned
by the Bank(2)

139,705

Canadian Western Trust Company

Suite 3000, 10303 Jasper Avenue

Canadian Direct Insurance Incorporated

Valiant Trust Company

Edmonton, Alberta

Suite 600, 750 Cambie Street

Vancouver, British Columbia

Suite 310, 606 4th St. S.W.

Calgary, Alberta

Adroit Investment Management Ltd.

Suite 1250, 10303 Jasper Avenue

Edmonton, Alberta

Canadian Western Bank Leasing Inc.

Suite 3000, 10303 Jasper Avenue

Edmonton, Alberta

Canadian Western Financial Ltd.

Suite 3000, 10303 Jasper Avenue

Edmonton, Alberta

Canadian Western Bank Capital Trust(3)

Suite 3000, 10303 Jasper Avenue

Edmonton, Alberta

(1) The Bank owns 100% of the voting shares of each entity, with the exception of Adroit Investment Management Ltd. (76.25% ownership).
(2) The carrying value of voting shares is stated at the Bank’s equity in the subsidiaries.
(3) In accordance with accounting standards, this entity is not consolidated as the Bank is not the primary beneficiary.

77,748

71,819

13,929

6,943

2,794

1,200

1,000

36. comPArAtive figures

Certain comparative figures have been reclassified to conform to the current period’s presentation.

37. suBseQuent events

During November 2010, the Bank redeemed $70,000 subordinated debentures with a fixed interest rate of 5.550%. In addition,
the Bank issued $300,000 subordinated debentures with a maturity date of November 30, 2020 and a fixed interest rate of 4.389%
for the first 5 years and thereafter, a floating rate at 3-month CDOR plus 1.930%. The Bank may redeem the debentures on or
after November 30, 2015 with the approval of OSFI.

110

knowing whAt works
CWB Group 2010 Annual Report

boarD of Directors
anD senior officers

(L – R) Howard Pechet, Raymond Protti, Alan Rowe, Albrecht Bellstedt,
Gerald McGavin, Wendy Leaney, Robert Phillips, Allan Jackson,
Larry Pollock, Arnold Shell, Robert Manning.

boarD of Directors
Albrecht W. A. Bellstedt, Q.C.
President
A.W.A. Bellstedt
Professional Corporation
Canmore, Alberta

Allan W. Jackson (Chairman)
President and
Chief Executive Officer
ARCI Ltd.
Calgary, Alberta

Wendy A. Leaney
President
Wyoming Associates Ltd.
Toronto, Ontario

Robert A. Manning
President
Cathton Investments Ltd.
Edmonton, Alberta

Gerald A.B. McGavin,
C.M.,O.B.C., FCA
President
McGavin Properties Ltd.
Vancouver, British Columbia

Howard E. Pechet
President
Mayfield Consulting Inc.
Rancho Mirage, California, USA

Robert L. Phillips, Q.C.
President
R.L. Phillips Investments Inc.
Vancouver, British Columbia

Larry M. Pollock
President and
Chief Executive Officer
Canadian Western Bank
Edmonton, Alberta

Raymond J. Protti
Consultant on national security
and financial services
Victoria, British Columbia

Alan M. Rowe
Partner
Crown Realty Partners
and Crown Capital Partners Inc.
Toronto, Ontario

Arnold J. Shell
President
Arnold J. Shell Consulting Inc.
Calgary, Alberta

DIRECTORS EMERITUS

Jack C. Donald

John Goldberg

Jordan L. Golding

Arthur G. Hiller

Peter M.S. Longcroft

Alma M. McConnell

Dr. Maurice W. Nicholson

Dr. Maurice M. Pechet

senior officers

ExECUTIVE OFFICERS

Larry M. Pollock
President and Chief Executive Officer

William J. Addington, FCMA
Executive Vice President

Tracey C. Ball, FCA, ICD.D
Executive Vice President
and Chief Financial Officer

Chris H. Fowler
Executive Vice President

Randy W. Garvey, FCMA
Executive Vice President

Brian J. Young
Executive Vice President

CORPORATE OFFICE

Lars K. Christensen
Vice President and Chief Internal Auditor

Dennis M. Crough
Vice President
Credit Risk Management

Richard R. Gilpin
Senior Vice President
Credit Risk Management

Ricki L. Golick
Senior Vice President and Treasurer

Carolyn J. Graham
Senior Vice President
and Chief Accountant

Gail L. Harding, Q.C.
Senior Vice President
General Counsel and
Corporate Secretary

Darrell R. Jones
Senior Vice President and
Chief Information Officer

Uve Knaak
Senior Vice President
Human Resources

Peter K. Morrison
Vice President
Marketing and Product Development

Stan B. Plaisier
Director
Porfolio Management

COMMERCIAL AND
RETAIL BANKING

James O. Burke
Vice President
Equipment Financing Group

Mario V. Furlan
Vice President
Real Estate Lending

Michael N. Halliwell
Senior Vice President and
Regional General Manager

Gregory J. Sprung
Senior Vice President and
Regional General Manager

Jack C. Wright
Senior Vice President and
Regional General Manager

CANADIAN WESTERN TRUST

Adrian M. Baker
Vice President and
Chief Operating Officer
Trust Services

Scott K.F. Scobie
General Manager

CANADIAN DIRECT
INSURANCE

Brian J. Young
President and Chief Executive Officer

Susannah M. Bach
Vice President
Corporate and Strategic Operations

Colin G. Brown
Chief Operating Officer

Michael Martino
Chief Financial Officer

Vince M. Muto
Vice President
Claims

ADROIT INVESTMENT
MANAGEMENT LTD.

David D. Schuster
President and Chief Executive Officer

Maria K. Holowinsky
Executive Vice President

VALIANT TRUST COMPANY

Adrian M. Baker
President

Matt K. Colpitts
General Manager

NATIONAL LEASING
GROUP INC.

Nick R. Logan
President and Chief Executive Officer

Tom E. Pundyk
Executive Vice President and Chief
Operating Officer

Michael W. Dubovec
Senior Vice President
Sales and Marketing

Alan W. Kowalec
Senior Vice President and
Chief Financial Officer

Jackie A. Lowe
Senior Vice President
Business Development
General Counsel and Secretary

OMBUDSMAN

R. Graham Gilbert

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CWB Group 2010 Annual Report 111

shareholDer inforMation

CWB Group Corporate
Headquarters
Canadian Western Bank & Trust
Suite 3000, Canadian Western Bank Place
10303 Jasper Avenue
Edmonton, Alberta T5J 3x6
Telephone: (780) 423-8888
Fax: (780) 423-8897
Website: www.cwbankgroup.com

Transfer Agent and Registrar
Valiant Trust Company
Suite 310, 606 - 4th Street S.W.
Calgary, Alberta T2P 1T1
Telephone: (866) 313-1872
Fax: (403) 233-2857
Website: www.valianttrust.com

Stock Exchange Listings
The Toronto Stock Exchange (TSx)
Common Shares: CWB
Series 3 Preferred Shares: CWB.PR.A
Common Share Purchase Warrants: CWB.WT

Shareholder Administration
Valiant Trust Company, with offices in Calgary,
Edmonton, Vancouver and Toronto, serves as
Transfer Agent and Registrar for the common
shares, preferred shares and common share
purchase warrants of CWB.

For dividend information, change in share
registration or address, lost share certificates, tax
forms or estate transfers, please write or call the
Transfer Agent and Registrar, or email
inquiries@valianttrust.com

Duplicated Communications
If you receive, but do not require, more than one
mailing for the same ownership, please contact the
Transfer Agent to combine the accounts.

Direct Deposit Services
Shareholders may choose to have CWB common
and preferred cash dividends deposited directly
into accounts held at their financial institutions.
To arrange direct deposit service, please contact
the Transfer Agent and Registrar.

Eligible Dividend Designation
CWB designates all dividends for both common
and preferred shares paid to Canadian residents as
“eligible dividends”, as defined in the Income Tax
Act (Canada), unless otherwise noted.

Dividend Reinvestment Plan
CWB’s dividend reinvestment plan allows common
and preferred shareholders to purchase additional
common shares by reinvesting their cash dividend
without incurring brokerage and commission fees.
For information about participation in the plan,
please contact the Transfer Agent and Registrar.

Investor Relations
Shareholders, institutional investors or research
analysts who would like additional financial
information are asked to contact:

Investor Relations Department
Canadian Western Bank
Suite 3000, Canadian Western Bank Place
10303 Jasper Avenue
Edmonton, Alberta T5J 3x6
Telephone: (800) 836-1886
Fax: (780) 969-8326
Email: InvestorRelations@cwbank.com

More comprehensive investor information – including
supplemental financial reports, quarterly financial
releases, corporate presentations, corporate fact
sheets and frequently asked questions – is available
under the Investor Relations section on our website
at www.cwbankgroup.com. This 2010 Annual
Report, along with our Annual Information Form,
Notice of Annual Meeting of Shareholders and
Proxy Circular, is available on our website.

awarD of excellence recipients for 2010

For additional printed copies of these reports,
please contact the Investor Relations Department.

Filings are available on the Canadian Securities
Administrator’s website: www.sedar.com

2011 Annual and Special Meeting
The annual and special meeting of the common
shareholders of Canadian Western Bank will be held
in Edmonton, Alberta, on March 3, 2011 at the Crowne
Plaza Chateau Lacombe (Alberta Ballroom),
at 3:00 p.m. MT (5:00 p.m. ET).

Corporate Secretary
Gail L. Harding, Q.C.
Senior Vice President
General Counsel and Corporate Secretary
Canadian Western Bank
Suite 3000, 10303 Jasper Avenue
Edmonton, Alberta T5J 3x6
Telephone: (780) 969-1525
Fax: (780) 969-8326
Email: gail.harding@cwbank.com

Complaints or Concerns regarding
Accounting, Internal Accounting
Controls or Auditing Matters
Please contact either:
Tracey C. Ball, FCA, ICD.D
Executive Vice President and
Chief Financial Officer
Canadian Western Bank
Telephone: (780) 423-8855
Fax: (780) 969-8326
Email: tracey.ball@cwbank.com
or
Robert A. Manning
Chairman of the Audit Committee
c/o 210 – 5324 Calgary Trail
Edmonton, Alberta T6H 4J8
Telephone: (780) 438-2626
Fax: (780) 438-2632
Email: rmanning@shawbiz.ca

Hard working. Enthusiastic. Responsive. Dedicated.
These are the characteristics exemplified by the recipients of the Award of Excellence, an annual recognition for employees who,
every day, live and breathe the qualities for which CWB Group is known.

Exceeding the expectations of both clients and colleagues, these individuals consistently take initiative, innovate and inspire.

Congratulations to the 2010 recipients of the Award of Excellence.

Alaina Strickland, CDI, Edmonton

Trisha Tyrrell, CDI, Cambie

Deborah Parsons, Calgary Main Branch

Connelly Sherwick, Medicine Hat Branch

Carm Corsetti, CWT, Cambie

Jeff Lunshof, Valiant Trust, Calgary

Hussein Bhanji, West Point Branch

Linda Huynh
Finance Department, Corporate

Shirley Maglalang
Finance Department, Corporate

112

knowing whAt works
CWB Group 2010 Annual Report

Wayne MacInnes
Credit Risk Management Department, Corporate

Terri Thirlwell, South Edmonton Common Branch

Demetra Papaspyros, Kitsilano Branch

Shelly Campbell, Real Estate Loans, Vancouver Regional

LOCATIONS

CANAdIAN
wESTERN bANK
REGIONAL OFFICES

British Columbia
2200, 666 Burrard Street
Vancouver
(604) 669–0081
Greg Sprung

Northern Alberta
3000, 10303 Jasper Avenue
Edmonton
(780) 423–8888
Jack Wright

Prairies
606 – 4 Street S.W.
Calgary
(403) 750-3577
Michael Halliwell

Equipment Financing
300, 5222 – 130 Avenue S.E.
Calgary
(403) 726-8242
Jim Burke

ALbERTA

Edmonton

Edmonton Main
11350 Jasper Avenue
(780) 424–4846
Mike McInnis

103 Street
10303 Jasper Avenue
(780) 423–8801
Gary Mitchell

Old Strathcona
7933 – 104 Street
(780) 433–4286
Donna Austin

South Edmonton Common
2142 – 99 Street
(780) 988–8607
Wayne Dosman

West Point
17603 – 100 Avenue
(780) 484–7407
David Hardy

Calgary

Calgary Main
606 – 4 Street S.W.
(403) 262–8700
Glen Eastwood

Chinook
6606 MacLeod Trail S.W.
(403) 252–2299
Lew Christie

Foothills
6127 Barlow Trail S.E.
(403) 269–9882
James Comstock

Calgary Northeast
2810 – 32 Avenue N.E.
(403) 250–8838
June Lavigueur

Abbotsford
100, 2548 Clearbrook Road
(604) 855–4941
Hugh Ellis

South Trail Crossing
300, 5222 – 130 Avenue S.E.
(403) 257–8235
Jay Neubauer

Broker Buying Centre
285, 2880 Glenmore Trail S.E.
(403) 720–8960
David Miller

Grande Prairie
11226 – 100 Avenue
(780) 831–1888
Todd Kramer

Leduc
5407 Discovery Way
(780) 986–9858
George Bawden

Lethbridge
744 – 4 Avenue South
(403) 328–9199
Don Grummett

Medicine Hat
102, 1111 Kingsway Avenue S.E.
(403) 527–7321
Les Erickson

Red Deer
4822 – 51 Avenue
(403) 341–4000
Don Odell

Sherwood Park
251 Palisades Way
(780) 449-6699
Blair Zahara

St. Albert
300, 700 St. Albert Trail
(780) 458–4001
Jeff Suggitt

bRITISH COLUMbIA

Vancouver

Park Place
100, 666 Burrard Street
(604) 688–8711
Rob Berzins

Kitsilano
3190 West Broadway
(604) 732–4262
Demetra Papaspyros

Vancouver Real Estate
2200, 666 Burrard Street
(604) 443-5118
Mario Furlan

West Broadway
110, 1333 West Broadway
(604) 730–8818
Jules Mihalyi

Coquitlam
Unit 310
101 Schoolhouse Street
(604) 540–8829
Ron Baker

Courtenay
200, 470 Puntledge Road
(250) 334–8888
Jason Zaichkowsky

Cranbrook
2nd Floor, Suite A
828 Baker Street
(250) 426–1140
Mike Eckersley

Kamloops
101, 1211 Summit Drive
(250) 828–1070
Peter Greenway

Kelowna
1674 Bertram Street
(250) 862–8008
Bob Brown

Kelowna Industrial
101, 1505 Harvey Avenue
(250) 860–0088
Jim Kruiper

Langley
100, 19915 – 64 Avenue
(604) 539–5088
Craig Martin

Nanaimo
101, 6475 Metral Drive
(250) 390–0088
Russ Burke

Prince George
300 Victoria Street
(250) 612–0123
David Duck

Surrey

Panorama Ridge
103, 15230 Highway 10
(604) 575-3783
Greg Noga

Strawberry Hill
1, 7548 – 120 Street
(604) 591–1898
Bob Duffield

Victoria
1201 Douglas Street
(250) 383–1206
Bob Granger

SASKATCHEwAN

Regina
100, 1881 Scarth Street
The Hill Center Tower II
(306) 757–8888
Kelly Dennis

Saskatoon

City Centre
244 – 2 Avenue
(306) 477–8888
Ron Kowalenko

North Landing
101, 2803 Faithfull Avenue
(306) 244–8008
Dwayne Demeester

Yorkton
45, 277 Broadway Street East
(306) 782–1002
Barb Apps

MANITObA

Winnipeg
230 Portage Avenue
(204) 956–4669
Robert Bean

CANAdIAN dIRECT
FINANCIAL
Edmonton
Suite 3000, 10303 Jasper Avenue
(877) 441–2249
www.canadiandirectfinancial.com

CANAdIAN wESTERN
TRUST COMPANY
Vancouver
600, 750 Cambie Street
(604) 685–2081

Toronto
1800, 130 King Street West
(416) 360-1078

Calgary
310, 606 – 4 Street S.W.
(403) 717–3145

Edmonton
3000, 10303 Jasper Avenue
(780) 969–8332

OPTIMUM MORTGAGE
Edmonton
3000, 10303 Jasper Avenue
(780) 423–9748
(Representation across Western
Canada and Ontario)

CANAdIAN dIRECT
INSURANCE INC.
Vancouver
600, 750 Cambie Street
(604) 699–3678

Edmonton
500, 10115 – 100A Street
(780) 413–5933

VALIANT TRUST
COMPANY
Calgary
310, 606 – 4 Street S.W.
(403) 233–2801

Edmonton
3000, 10303 Jasper Avenue
(780) 441-2267

Toronto
1800, 130 King Street West
P.O. Box 34
(416) 360–1481

Vancouver
600, 750 Cambie Street
(604) 699–4880

AdROIT INVESTMENT
MANAGEMENT LTd.
Edmonton
1250, 10303 Jasper Avenue
(780) 429–3500

NATIONAL LEASING
GROUP INC.
Winnipeg
1525 Buffalo Place
(204) 954-9000
(Representation across
all provinces and territories
in Canada)

CANAdIAN wESTERN
FINANCIAL LTd.
Edmonton
3000, 10303 Jasper Avenue
(780) 423–8888

Cert no. SW-COC-002083